THE JOURNAL FOR CMAs

MANAGEMENT
THE
ACCOUNTANT
ISSN 0972-3528 August 2016 VOL 51 NO. 8 Pages - 124 100

CAPACITY
BUILDING FOR
SUSTAINABILITY
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
(Statutory body under an Act of Parliament) www.icmai.in 1
www.icmai.in August 2016 l The Management Accountant 1
2 The Management Accountant l 2
August 2016 www.icmai.in
 The Institute of Cost
Accountants of India
PRESIDENT THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
CMA Manas Kumar Thakur
(erstwhile The Institute of Cost and Works Accountants
president@icmai.in
VICE PRESIDENT
of India) was first established in 1944 as a registered
CMA Sanjay Gupta company under the Companies Act with the objects of
vicepresident@icmai.in promoting, regulating and developing the profession of
COUNCIL MEMBERS Cost Accountancy.
CMA Amit Anand Apte, CMA Ashok Bhagawandas Nawal, On 28 May 1959, the Institute was established by a
CMA Avijit Goswami, CMA Balwinder Singh,
special Act of Parliament, namely, the Cost and Works
CMA Biswarup Basu, C MA H. Padmanabhan,
CMA Dr. I. Ashok, C
MA Niranjan Mishra,
Accountants Act 1959 as a statutory professional body for
CMA Papa Rao Sunkara, CMA P. Raju Iyer, the regulation of the profession of cost and management
CMA Dr. P V S Jagan Mohan Rao, accountancy.
CMA P. V. Bhattad, CMA Vijender Sharma It has since been continuously contributing to the
Shri Ajai Das Mehrotra, Shri K.V.R. Murthy,
growth of the industrial and economic climate of the
Shri Surender Kumar, Shri Sushil Behl,
country.
Secretary The Institute of Cost Accountants of India is the only
CMA Kaushik Banerjee, secy@icmai.in recognised statutory professional organisation and
Sr. Director (Finance, Admin. & HR) licensing body in India specialising exclusively in Cost
CMA Arnab Chakraborty, finance.arnab@icmai.in
and Management Accountancy.
Sr. Director (CAT, Training & Placement)
CMA L Gurumurthy, cat.gurumurthy@icmai.in
Sr. Director (Technical)
CMA J K Budhiraja, technical.budhiraja@icmai.in
Director (Examinations) MISSION STATEMENT
CMA Amitava Das, exam.amitava@icmai.in
Director (PD) The CMA
CMA S C Gupta, pd.director.@icmai.in Professionals would
Director (Research & Journal) & Editor
ethically drive enterprises globally
CMA Dr. Debaprosanna Nandy, rnj.dpnandy@icmai.in
Director (Membership)
by creating value to stakeholders
CMA A S Bagchi, membership.bagchi@icmai.in in the socio-economic context through
Director (Discipline) & Jt. Director competencies drawn from the integration of
CMA Rajendra Bose, discipline.director@icmai.in strategy, management and accounting.
Additional Director (IT)
Smt. Anita Singh, it.anita@icmai.in
Joint Director (Tax Research)
VISION STATEMENT
CMA Chiranjib Das, taxresearch@icmai.in
Joint Secretary & In-Charge (CPD)
The Institute of Cost Accountants of India
CMA Nisha Dewan, jsecy.nisha@icmai.in
Joint Director (Infrastructure) would be the preferred source of
CMA Kushal Sengupta, finance.kushal@icmai.in resources and professionals for the
Joint Director (President’s & Vice President’s office) financial leadership of
CMA Tarun Kumar, presidentoffice.tarun@icmai.in
Joint Director (Studies & Academics)
enterprises globally.
CMA Sucharita Chakraborty, studies.sucharita@icmai.in
Deputy Director (Advanced Studies)
CMA M.P.S Arun Kumar, advstudies.arun@icmai.in
Editorial Office
CMA Bhawan, 4th Floor, 84, Harish Mukherjee Road, Kolkata-700 025
IDEALS THE INSTITUTE STANDS FOR
Tel: +91 33 2454-0086/0087/0184 , Fax: +91 33 2454-0063 • to develop the Cost and Management Accountancy profession
Headquarters
CMA Bhawan, 12, Sudder Street, Kolkata 700016 • to develop the body of members and properly equip them for
Tel: +91 33 2252-1031/34/35 , Fax: +91 33 2252-7993/1026 functions
Delhi Office
CMA Bhawan, 3, Institutional Area, Lodi Road, New Delhi-110003 • to ensure sound professional ethics
Tel: +91 11 24622156, 24618645 ,Fax: +91 11 4358-3642
• to keep abreast of new developments
WEBSITE
www.icmai.in Behind every successful business decision,
there is always a CMA

www.icmai.in August 2016 l The Management Accountant 3

 AUGUST 2016

INSIDE
COVER STORY
Skill Development for capacity building -
Telecom Industry 30
August 2016 VOL 51 NO. 8 100
Strengthening Accounting in Primary Agricultural
Cooperative Societies 37
Capacity Development in Education Sector -
An Overview of Meritocratic Countries 41
Study on Sustained Competitive Advantage of P & G 48

CMA Kaushik Banerjee INTERVIEW

CMA Asim Kumar Basu, Director (Finance), MSTC Ltd 51

INTERNATIONAL CORNER

Many Implications of Leaving an Economic Union 54

ECONOMY

Fiscal Federalism: Issues and Pitfalls in Local Self

Governance 59

BANKING

Disruptive Innovation
Indian Banking Industry 63
DISCLAIMER
Gold Policy and GMS: Indian Perspective 80

4 The Management Accountant l August 2016 www.icmai.in

COMPANIES ACT

Reporting of Frauds 71
TQM

TQM: 'A tool of business excellence through customer

delight' 76

CASE STUDY

Reduction in Sugar Conversion Cost 88

TAXATION

GST : A Perceptual Study among the Tax Professionals 96

Ease of doing Business for EOU/EHTP/STP/BTP
operations 119

Editorial 8

President's Communiqué 10

Council Committee for the year 2016-2017 13

ICAI-CMA Snapshots 18

Glimpses of 1st National Conclave for Members in Industry 24

Institute News 102

From the Research Desk 112

Economy & Tax Updates 114

CMA Career Awareness Programme 121

www.icmai.in August 2016 l The Management Accountant 5

 New President
CMA Manas Kumar Thakur

CMA Manas Kumar Thakur has been unanimously elected as the President of
the Institute of Cost Accountants of India for the year 2016-2017.
Apart from a Fellow Member of the Institute, CMA Thakur also holds B.Sc. and
B.Com degree. Since childhood days his mind was application oriented, thus, he
found keen interest both in mathematics as well as in playing football. He has
represented his District and State in his short span of football career.
An academician with more than 25 years of teaching experience he has authored
several books on Valuation Management, Operations Management, Cost Audit,
Laws & Audit, Cost & Management etc. He has published several articles in
different reputed journals and offered his professional acumen in different
professional institutes including Government organizations.
He takes keen interest in delving into corporate and professional issues. He is
closely associated with various fields of financial and education sector and is an
experienced mentor and counsellor to young professionals and students. CMA
Manas Kumar Thakur is holding Certificate of Practice since 1993 and carries
with himself a rich experience of 23 years of practice. Before joining in practice
he was in service in various reputed organisations like Brooke Bond India Ltd.,
Lipi Scan Pvt. Ltd. etc.
Recently he has been awarded with "Bharat Nirman Award" by a reputed Delhi
based NGO.
CMA Manas Kumar Thakur was a Regional Council Member during 2004-2011
and became the Chairman of EIRC in 2009-2010. He was elected to the Central
Council of the Institute from Eastern Region for the periods 2011-2015 and 2015-
2019. He has served as the Vice President of the Institute of Cost Accountants of
India for the year 2015-2016.
He is the member of different Chambers of Commerce like ASSOCHAM, CII,
Bharat Chamber of Commerce, Indian Chamber of Commerce and also an
Advisory member of CDR of SBI. He is also the Partner of Thakur & Co. (Cost
Accountants).

6 The Management Accountant l August 2016 www.icmai.in

 New Vice President
CMA Sanjay Gupta

CMA Sanjay Gupta has been elected as Vice-President of the Institute of Cost
Accountants of India for the year 2016-17. CMA Sanjay Gupta is a Fellow
Member of the Institute of Cost Accountants of India.
A combination of youth, dynamism, experience, Leadership Skills and excellence
with more than 17 years of impeccable professional standing and proven track
record, CMA Sanjay Gupta has been elected to the Central Council for two
consecutive terms (2011-15, 2015-19). He was the Chairman of NIRC of the
Institute in 2009-10. He has been the Chairman of WTO and International
Affairs Committee of Institute since 2011. He has also effectively contributed to
the cause of the profession as a member of the Risk Management and Corporate
Governance Committee, Finance Committee, Infrastructure & Information
Technology Committee, Committee for Accounting Technicians, Committee for
Advanced Studies, Committee for Members in Industry, Research, Journal & IT
Commitee, Direct Taxation Committee and many other committees in the past.
He is also the Director of ICWAI Management Accounting Research Foundation.
A proponent of putting Costing & Management Accountancy Profession on
global map, he has also represented the profession on the international front at a
number of global meetings and conferences like Integrated Reporting necessary
for Sustainability, Reporting of usage of Natural Resources, Cultural Diversity
and its impact on Sustainable Business, Integration of Sustainability with
Financial Reporting etc.
CMA Sanjay Gupta has around 18 years of experience in Telecom, Power &
Aviation Sector in the fields of Costing, Regulatory, Revenue Assurance,
mergers & amalgamations, Costing, Management Accounting, Budgeting,
Forecasting and Systems Development. He has been an eloquent Speaker on
various topics in Regional/National and International conferences organized by
ICAI, NIRC, Chapters & other professional bodies like The Prince’s Accounting
for Sustainability Project (A4S), IFAC, GRI, TRAI, ASSOCHAM, FICCI,
IUCN etc. CMA Sanjay Gupta has been actively involved as Speaker in the
Management Colleges like IMT Ghaziabad, Symbiosis Bangalore, IITs & IIMs
and has also been in the Committee for the Selection Interviews for the MBA
Batches for various colleges.
CMA Sanjay Gupta is also the Partner of Sanjay Gupta & Associates, Cost
Accountants.

www.icmai.in August 2016 l The Management Accountant 7

EDITORIAL
Greetings!!!
Capacity building is the process of
unleashing, strengthening, creating, adapting
and maintaining capacity over time (OECD,
2006). It refers to premeditated, synchronized
and mission-driven efforts aimed at
strengthening the management and governance
of nonprofit organizations to improve
their performance and impact. This occurs
through organization development activities,
such as leadership development, strategic
planning, program design and evaluation,
board development, financial planning and
management and others.
IFAC recognizes the importance of
understanding country context and tailoring
Professional Accountancy Organization (PAO)
capacity building efforts to address the unique
needs of each national environment.
IFAC has identified the nine components
that cover the full spectrum of a PAO’s
responsibilities and, when properly addressed,
contribute to a successful PAO that serves both
the public and private sectors.
The nine components are interdependent but
fall into three categories—the building blocks of
PAO capacity building:
 Sustainability: appropriate legal
foundation(s), governance structure, and
operational capacity;
 Standards and enforcement: facilitating
the adoption and implementation of standards
for accountancy education, ethics, audit, and
public sector accounting based on international
benchmarks and monitoring compliance;
 Relevance: connectivity between a PAO
and its membership base and broader society in
order to understand and respond to the needs
of both groups across the private and public
sectors.
Core Capacity Building Activities
Capacity building engages organizations in
the following core activities using a combination
of standard and tailored approaches:
 Assessment- Asset based forms and
8 The Management Accountant l August 2016
processes have been designed to assist in
pinpointing their current status and goals for
growth. Complete the assessment, examine
results, use the results to develop action plan
priorities and goals and measure progress.
 Planning- Using a format that aligns with
the assessment, then complete action plans
that prioritize growth areas and include goals
and action steps. The action plan guides the use
of resources to address priorities.
 Implementation- Resource Linkage and
Technical Assistance. Based on the action plan,
identify resources, choosing from a range of
options.
 Evaluation and Learning- Finally,
reassess their capacity periodically, comparing
their new capacity levels in different elementary
areas to their initial assessment. They monitor,
document and report their progress on action
planning and capacity development, and engage
in learning opportunities.
While the importance of capacity building
is widely acknowledged, more attention
needs to be drawn to the identification and
implementation of effective capacity building
approaches. The ultimate goal of capacity
building is to sustain a process of individual
and organizational change and to enable
organizations, groups and individuals to
achieve their development objectives. Any
capacity building activity needs to be carefully
designed so that it contributes to this goal.
In this process, it is essential that the needs
of the beneficiaries as well as the already
existing capacities in a country are carefully
assessed and that the specific capacity building
objectives are clarified.
This issue also presents a good number of
articles on the cover story theme ‘Capacity
Building for Sustainability’ by distinguished
experts and authors as well as an interview
from industry stalwart. We look forward to
constructive feedback from our readers on the
articles and overall development of the journal.
Please send your mails at editor@icmai.in. We
thank all the contributors to this important
issue and hope our readers enjoy the articles.
www.icmai.in
 -: PAPERS INVITED :-
Cover stories on the topics given below are invited for ‘The Management
Accountant’ for the four forthcoming months.

e e me e me e me
em Th Th Th
ThCost Competitiveness - ​ Economic Innovations - ​​ The Changing Role of 25 Years of Economic
C​omplexity to ​ the game changer Management Reforms in India
C​onfidence Accountants
September October November December

2016 2016 2016 2016

Subtopics Subtopics Subtopics Subtopics

• Strategies for staying
Cost Competitive
• Building Market Share
by Cost Competitiveness
• Cost Competitiveness
for Sustainability
• Economics of Cost
Competitiveness
• Strategic Cost Analysis
• Case Studies
• Role of CMAs
• Innovations in Finance • Traditional role to a
and its impact on more dynamic involve-
economy ment in businesses
• Accounting Standards as • Experiencing change
a game changer from a strategic apex
role
• New tools in Strategic
Cost Management • Management Account-
ants as business partner
• Innovations in produc- and change agent
tion process
• New tools and tech-
• Innovations in IT/ITES
niques
• Innovative ideas on • Performance measure-
Cost Management - role ments
of CMAs
• Corporate Governance
• Innovations in different and business ethics
sectors of economy -
case study • Achievement towards
sustainability goals
• Case Studies
• Issues & Challenges
• Economic and Fiscal
policy Reforms and its
impact
• Sector wise Reforms and
its impact
• India in the Global
economy in post-reforms
period
• Economic Reforms and
Social developments
• Economic Reforms and
Nation Building - Role
of CMAs
• Economic Reforms -
Unfinished Agenda

The above subtopics are only suggestive and hence the articles may not be limited to them only.
Articles on the above topics are invited from readers and authors along with scanned copies of their recent passport-size
photograph and scanned copy of declaration stating that the articles are their own original and have not been considered for
publication anywhere else. Please send your articles by e-mail to editor@icmai.in latest by the 1st of the previous month.

Directorate of Research & Journal

The Institute of Cost Accountants of India (Statutory body under an Act of Parliament)
CMA Bhawan, 4th Floor, 84 Harish Mukherjee Road, Kolkata - 700 025, India
Board: +91-33- 2454 0086 / 87 / 0184, Tel-Fax: +91-33- 2454 0063
www.icmai.in

www.icmai.in August 2016 l The Management Accountant 9

 PRESIDENT’S COMMUNIQUÉ
CMA MANAS KUMAR THAKUR
President
The Institute of Cost Accountants of India
My Dear Professional Colleagues,
Namaskaar
This is a very humbling day for me as I am collecting
my thoughts to address all of you as President of this
great Institution for the first time.I feel nostalgic as
It reminds me of my very first day when I passed out
from the Institute believing that this was the best
profession for me. This is the very same inspiration
that continues to drive me today when I have taken
over as the President of the Institute.
It is an incredible honour for me to lead and serve
this great Institute. I am grateful to my predecessor
CM A PV Bhattad for showing confidence and
fa ith in me and my abilities. I am thankful to all
my Council Colleagues for unanimously electing
me as President and I hope that their full support
wi ll continue to be there to the Chair. I take this
opportunity to congratulate my visionary colleague
CMA Sanjay Gupta on his election as Vice-President
of the Institute. I hope that with his cooperation and
10 The Management Accountant l August 2016
We have gone through some difficult
times like everyone else and perhaps our
wo rking together and respecting each
other's abilities, in addition to that little
thing called love, will help us survive.
-- Cynthia Weil
support we will be able to put our best
fo ot forward for the development and
growth of the profession and the Institute.
I am thankful to the Past Presidents of the
Institute for their blessings and good wishes. I
am of the firm belief that the Institute has got its
present shape due to the efforts and vision of our
Pa st Presidents. I am grateful to the Icons of the
Profession for their continuous support and guidance.
I acknowledge the support of the Regions and all
Chapters of the Institute and urge them to work in
the interest of the profession and the Institute with
much more vigour.
Meetings with Stakeholders
I am looking forward to getting around the
stakeholders and doing a lot of listening. In my first
few days of taking charge as President, I along with
Vice-President had several meetings with Ministers
an d departmental heads. We met Hon’ble Shri
ArunJaitley, Union Minister of Finance & Corporate
Affairs who was gracious enough to listen to our
concerns and assured us all necessary support. We
met Hon’ble Shri AR Meghwal Ji, Minister of State for
Finance & Corporate Affairs and discussed with him
our expectations and concerns. We hope that MCA
will continue to support and guide us on various
professional and administrative matters. We had a
meeting with Hon’ble Shri Santosh Gangwar, Minister
of State for Finance. He is one of the few VIPs who
have been constant well-wisher of the Institute. We
look forward to have lot of support from him. We also
had a courtesy meeting with Hon’ble Col. RS Rathore,
Minister of State for Information and Broadcasting.
Our meeting with Shri Tapan Ray, IAS, Secretary,
MCA was quite positive. He assured us all the
www.icmai.in
necessary help from the Ministry to resolve the
pending issues. He also expressed his concern about
the ongoing untoward mailing business of some of
our members which is painting a very bad picture of
our profession and Institute. Meeting with Additional
Secretary, Economic Affairs was quite fruitful and a
lot of discussion took place on the issue of IBC 2016.
Institute has got representation in two of the Working
Groups constituted by the MCA for implementation
of IBC 2016. With a view to improve our relations
with the representatives of people i.e. Members of
Parliament, we had courtesy meeting with number of
MPs.
We also met Addl. Chief Advisor (Cost) & Advisor
(Cost). I wish to inform you that the MCA has
constituted a Standing Technical Committee to
examine the Standards on Cost Auditing submitted by
the Institute for Government approval. The Institute
has its representative on this committee and it is
expected to start functioning shortly.
Support from members
Friends, I expect the constructive support of
members of the profession to the leadership in
each aspect of working. We are like a family and in
every family there are issues but these issues should
be resolved within the family by the family. In the
interest of the profession I urge the members not
to involve in sending unnecessary emails in various
groups on social media. I am sure the stakeholders do
not find these things in good taste and consequently
negativity is created in their minds about the
profession and the Institute. I sincerely appeal to the
members to think about it.
Support from Staff
I am proud to be leading a team of talented and
committed people in the Institute across the Country,
who has been putting its best efforts in the interest of
the Institute. We have a very talented and dedicated
pool of employees which is a great asset for the
Institute. It is our duty to lead them in right direction
with proper guidance. The most important thing is
that we all focus on being on top of our business.
We need to keep it simple and industry focused.
We must understand that periods of change can be
unsettling, but we have to take our destiny in our
own hands and be absolutely focused on delivering
the best possible experience for our stakeholders.
www.icmai.in
In my first meeting with the Institute’s staff I made
it quite clear that we should look to improve our
performance all the time.We may need to take few
hard decisions. The decisions will be based on what’s
best for the Institute, profession, members, students
and all stakeholders. We have some urgent issues to
deal with, but we must address them in a way which
is consistent with building a long-term sustainable
future.
Agenda for a bright future
Friends, you may be aware that it has not been
an easy time for our profession and Institute. The
competition has become extremely tough, and it is
the survival of the fittest kind of situation. Hence,
capacity building of members is of utmost importance.
We are losing market share in terms of students even
after having the best syllabus in the business. These
are some of the urgencies which we need to address
immediately. My predecessor had already taken
necessary steps and now I will have to take it forward.
Apart from this and follow up for our long standing
demands from Government I will try to implement the
following points for a bright and sustainable future of
the Institute and Profession:
 Relaunch the existing President’s Portal for
Members & students with e-learning, live
chat, problem solving process etc. Members &
students can submit their grievance, queries,
suggestion etc. directly to President via this
portal. President’s Office will be directly
looking after all such things and will be
responsible for the whole system.
 Brand Building: More emphasis will be given to
create or increase the brand value of our Nobel
Profession as well as liaison with Government.
 Liaison with the Chief Ministers of all states
with a presentation containing role of the
CMA profession towards the development of
respective state.
 Setting up a dedicated technical team
consisting of qualified professionals to take
up important assignments from stakeholders.
 Priority areas like GST, IBC 2016 etc. will be
emphasised.
 Placement Department will be strengthened to
take up additional responsibility of effective
and proactive career counselling.
 New Cell for Skill and Entrepreneurship
August 2016 l The Management Accountant 11
 PRESIDENT’S COMMUNIQUÉ
Development to support Government policy
and create brand value of the Institute in socio
economic context.
 Advanced Studies Department will be
strengthened in order to introduce more
diploma courses for non CMAs, like Engineers,
MBAs in association with MARF. (After passing
the diploma course they may be given certain
exemptions to get enrolled into CMA Course)
 With a vision to expand its activities to the state
level the MARF will be strengthened.
 Apart from Cost Audit, special emphasis
will be given to explore new areas for CMA
Professionals in important sectors like Health,
Bank, Education, Insurance, Transport, MSMEs
etc.
 We are working on a unique Chapter Adoption
Policy wherein 15 Council Members will take
responsibility to improve the non-performing
/ least performing chapters of their respective
region and motivate them to be a part of the
main stream with much more vigour.
 Propagate the significance and importance of
Cost Management Mechanism in the countries
where CMA professional body does not exist.
 Since students are the most important pillar of
the Institute, special initiatives will be taken to
secure their future by providing them placement
or enable them start their practice as CMA.
 To continue supporting Government initiatives
like SwachchtaPakhwada, Yoga Diwas and
others such programs. I am pleased to inform
that the MCA has appreciated the initiatives
of the Institute taken during the recently
concluded Swachchta Pakhwada.
The above mentioned list is not exhaustive but
just an indication of my honest approach to the
cause of profession and the Institute. I have always
communicated openly and transparently with members
and students and expect the same from them in
return. I want to have your thoughts and constructive
ideas. I want to know what you think we could do
differently or better. Hopefully we will get a chance
to do this in members’ or students’ meets, but for the
sake of immediacy I urge all of you to please post your
comments or suggestions or ideas on President’s Portal
of the Institute’s website by following the link http://
icmai.in/President_Portal/Suggestions-login.php.
12 The Management Accountant l August 2016
Launching of SYLLABUS 2016
The Institute is launching its syllabus 2016 today
to nurture young business leaders of tomorrow who
can convert the dream of Make in India into reality
by taking strategic management decisions effectively
in both the national and international arena. The new
syllabus is based on the international standards set by
IFAC and IAESB (International Accounting Education
Standards Board).
Welcome new Members
I congratulate and welcome all the new 315 Associate
members who were granted membership and all the 81
members who were advanced to Fellow membership
during the month of July 2016. I am pleased to inform
that for all online payments related to membership,
members need to pay only the applicable fees. No
convenience charges, as was applicable earlier, will be
charged for payments made through debit/credit card
or net banking.
Friends, in the end I just want to remind you the
motto of our Institute in the spirit of its emblem;
“Tamaso Ma Jyotirgamaya” meaning “From darkness
(of ignorance) lead me to Light (of Knowledge)”. In
the same spirit I urge all of you to come together and
contribute your bit to make the Indian Industry cost
competitive and cost conscious in order to realise our
beloved Prime Minister Hon’ble Shri Narendra Modi Ji’s
dream of “Make in India”.
I know I can count on your support, and I’m looking
forward to working with you for a better future of the
generations to come.
I wish prosperity and happiness to members,
students and their families on the occasion of Teej,
Nag Panchmi, Independence Day, RakshaBandhanand
Shri Krishna Janmashtmiand wish them success in all
of their endeavours.
With warm regards,
(CMA Manas Kumar Thakur)
1st August 2016
www.icmai.in
 The Institute of Cost Accountants of India 
(Council Committees for the year 2016-17)
Standing Committees

1. Executive Committee 2. Examination Committee 
(Quorum: 4) (Quorum: 4)
Chairman Chairman
1. CMA Manas Kumar Thakur, President 1. CMA Manas Kumar Thakur, President

Members Members
2. CMA Sanjay Gupta, Vice- President 2. CMA Sanjay Gupta, Vice- President
3. Shri Sushil Behl, Government Nominee 3. CMA Biswarup Basu
4. CMA P.V. Bhattad, IPP 4. CMA P. Raju Iyer
5. CMA Amit Anand Apte 5. CMA Papa Rao Sunkara
6. CMA Dr. P.V.S. Jagan Mohan Rao 6. CMA Balwinder Singh
7. CMA H. Padmanabhan 7. CMA A.B. Nawal

Secretary Secretary
CMA Kaushik Banerjee, Secretary CMA Amitava Das, Director (Examination)

3. Finance Committee 
(Quorum: 4)
Chairman
1. CMA Manas Kumar Thakur, President

Members
2. CMA Sanjay Gupta, Vice- President
3. Shri Surender Kumar, Government Nominee
4. CMA Niranjan Mishra
5. CMA Dr. I. Ashok
6. CMA Avijit Goswami
7. CMA Vijender Sharma

Secretary
CMA Arnab Chakrabarty, Sr. Director (Finance, Admin & HR)

Other Committees 
4. Disciplinary Committee U/s 21B(1) 5. Training & Education Facilities Committee
(Quorum: 3) (Quorum: 4)
Presiding Officer Chairman
1. CMA Sanjay Gupta, Vice- President 1. CMA Papa Rao Sunkara

Members
Members
2. CMA Niranjan Mishra
2. Shri Surender Kumar, Government Nominee
3. CMA P. Raju Iyer
4. Disciplinary Committee U/s 21B(1) - Government 3. CMA Niranjan Mishra
Nominee 4. CMA Balwinder Singh
5. Disciplinary Committee U/s 21B(1) - Government 5. CMA Amit Anand Apte
Nominee 6. CMA H. Padmanabhan
7. CMA Dr. I. Ashok
Secretary
CMA S. C. Gupta, Director(PD) Secretary
CMA Sucharita Chakraborty, Joint Director (Academics
& Studies)

www.icmai.in August 2016 l The Management Accountant 13

 The Institute of Cost Accountants of India 
(Council Committees for the year 2016-17)

6. Research, Journal and IT Committee 7. Professional Development, Banking &

(Quorum: 4) Insurance Committee (Quorum: 5)

Chairman Chairman
1. CMA Avijit Goswami 1. CMA Amit Anand Apte

Members Members
2. Shri Surender Kumar, Government Nominee 2. Govt Nominee CAG
3. CMA Vijender Sharma 3. CMA H. Padmanabhan
4. CMA Dr. P.V.S. Jagan Mohan Rao 4. CMA Balwinder Singh
5. CMA Papa Rao Sunkara 5. CMA Niranjan Mishra
6. CMA P. Raju Iyer 6. CMA Avijit Goswami
7. CMA H. Padmanabhan 7. CMA P. Raju Iyer
8. CMA Amit Anand Apte 8. CMA Dr. I. Ashok
9. Advisor (Cost)
Secretary (Research &Journal) 10. CMA B.B. Goyal
CMA Dr. Debaprosanna Nandy, Director (Research &
Journal) & Editor Secretary (Professional Development)
Secretary (IT) CMA J.K. Budhiraja, Senior Director (Technical)
Ms Anita Singh, Additional Director (IT)
Secretary (Banking & Insurance)
Shri Pradipta Gangopadhyay, Deputy Director (Research
& Journal)

8. Continuing Professional Development Committee 9. Auditing & Assurance Standards Board

(Quorum: 4) (Quorum: 7)
Chairman Chairman
1. CMA Sanjay Gupta, Vice- President 1. CMA P. Raju Iyer

Members Members
2. Shri Surender Kumar, Government Nominee 2. Shri Sushil Behl, Government Nominee
3. Shri Sushil Behl, Government Nominee 3. CMA Balwinder Singh
4. CMA P.V. Bhattad, IPP 4. CMA Niranjan Mishra
5. CMA Biswarup Basu 5. CMA Amit Anand Apte
6. CMA Amit Anand Apte 6. CMA Biswarup Basu
7. CMA H. Padmanabhan 7. CMA B.B. Goyal
8. CMA A.B. Nawal 8. CMA Mrityunjay Acharjee
9. CMA Ajay Deep Wadhwa
Secretary 10. Nominee of MCA
CMA Nisha Dewan, Joint Secretary 11. CMA B.M. Sharma
12. CMA A.N. Raman
13. CMA Chandra Wadhwa
14. Nominee of - CII/FICCI/ ASSOCHAM/ PHDCCI
15. Nominee of - CII/FICCI/ ASSOCHAM/PHDCCI
16. Nominee of - CII/FICCI/ ASSOCHAM/PHDCCI
17. Nominee of CAG
18. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
19. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
20. Nominee of ICSI
21. Nominee of IIM - Dr. Pankaj Gupta

Secretary
CMA J.K. Budhiraja, Senior Director (Technical)

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 The Institute of Cost Accountants of India 
(Council Committees for the year 2016-17)

10. Regional Council & Chapters Coordination  11. WTO, International Affairs and Sustainability 

Committee (Quorum: 4) Committee (Quorum: 4)

Chairman Chairman
1. CMA Niranjan Mishra 1. CMA H. Padmanabhan

Members Members
2. Shri Surender Kumar, Government Nominee 2. Shri K.V.R. Murthy, Government Nominee
3. CMA Balwinder Singh 3. Shri Ajai Das Mehrotra, Government Nominee
4. CMA Dr. I. Ashok 4. CMA Avijit Goswami
5. CMA Amit Anand Apte 5. CMA P. Raju Iyer
6. CMA H. Padmanabhan 6. CMA P.V. Bhattad, IPP
7. CMA Avijit Goswami 7. CMA A.B. Nawal

Secretary Secretary
CMA Arnab Chakrabarty Sr. Director (Finance, CMA Nikhil Agarwal, Sr. Officer (International
Admin & HR) Affairs)

12. Taxation Committee  13. CAT Committee

(Quorum: 6) (Quorum: 4)
Chairman Chairman
1. CMA A.B. Nawal 1. CMA Dr. I. Ashok

Members Members
2. Shri Ajai Das Mehrotra, Government Nominee 2. Shri Surender Kumar, Government Nominee
3. Shri Sushil Behl, Governemnt Nominee 3. CMA Biswarup Basu
4. CMA Amit Anand Apte 4. CMA Papa Rao Sunkara
5. CMA Papa Rao Sunkara 5. CMA Amit Anand Apte
6. CMA Balwinder Singh 6. CMA Avijit Goswami
7. CMA Dr. P.V.S. Jagan Mohan Rao 7. CMA H. Padmanabhan
8. CMA S. R. Bhargave
9. CMA Mohammad Rafi Secretary
10. CMA N. Swain CMA L. Gurumurthy, Senior Director (CAT, Training
11. Shri Sanjay Goyal & Placement)

Secretary
CMA Chiranjib Das, Joint Director (Tax Research)
 

14. Corporate Laws, Governance & Corporate 15. Members’ Facilities & Services Committee

Sustainability Committee   (Quorum: 4) (Quorum: 3)
Chairman Chairman
1. CMA Dr. P.V.S. Jagan Mohan Rao 1. CMA Biswarup Basu

Members Members
2. Shri K.V.R. Murthy, Government Nominee 2. CMA A.B. Nawal
3. Shri Ajai Das Mehrotra, Government Nominee 3. CMA Niranjan Mishra
4. CMA Biswarup Basu 4. CMA Papa Rao Sunkara
5. CMA Vijender Sharma 5. CMA Vijender Sharma
6. CMA Papa Rao Sunkara 6. CMA P. Raju Iyer
7. CMA A.B. Nawal
Secretary
Secretary CMA Arup S. Bagchi, Director (Membership)
CMA Dibbendu Roy, Joint Director (Finance)

www.icmai.in August 2016 l The Management Accountant 15

 The Institute of Cost Accountants of India 
(Council Committees for the year 2016-17)

16. Members in Service & Training & Placement  17. Cost Management Accounting & Election

Committee (Quorum: 4) Reforms Committee (Quorum: 3)
Chairman Chairman
1. CMA P.V. Bhattad, IPP 1. CMA Vijender Sharma

Members Members
2. Shri K.V.R. Murthy, Government Nominee 2. Shri Ajai Das Mehrotra, Government Nominee
3. CMA Dr. P.V.S. Jagan Mohan Rao 3. CMA Dr. P.V.S. Jagan Mohan Rao
4. CMA A.B. Nawal 4. CMA P.V. Bhattad, IPP
5. CMA Avijit Goswami 5. CMA Biswarup Basu
6. CMA Dr. I. Ashok 6. CMA Dr. I. Ashok
7. CMA Vijender Sharma
Secretary
Secretary CMA Kaushik Banerjee, Secretary
CMA L. Gurumurthy, Senior Director (CAT, Training
& Placement)

18.  Infrastructure Committee   19. Cost Accounting Standards Board

(Quorum: 4) (Quorum: 9)
Chairman Chairman
1. CMA Manas Kumar Thakur, President 1. CMA Balwinder Singh

Members Members
2. Shri Ajai Das Mehrotra, Government Nominee 2. Shri Sushil Behl, Government Nominee
3. Govt Nominee CAG 3. CMA Niranjan Mishra
4. CMA Vijender Sharma 4. CMA P. Raju Iyer
5. CMA Dr. I. Ashok 5. CMA Dr. P.V.S. Jagan Mohan Rao
6. CMA Dr. P.V.S. Jagan Mohan Rao 6. CMA Avijit Goswami
7. CMA P.V. Bhattad, IPP 7. CMA B.B. Goyal
8. CMA K. Narasimha Murthy
Secretary 9. CMA D. V. Joshi
CMA Kushal Sengupta, Joint Director (Finance) 10. CA Chandrashekhar Chitale
11. PCA/Co-opted - Name to be given
12. CMA M.R. Rath
13. CMA Sushil Kothari
14. Nominee of Corporates/Industry
15. CMA Sham Waugh
16. Nominee of Academic Institutions
17. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
18. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
19. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
20. Nominee of Regulator - TRAI/PNGRB/SEBI/CCI
21. Nominee of - CII/FICCI/ASSOCHAM/PHDCCI
22. Nominee of - CII/FICCI/ASSOCHAM/PHDCCI
23. Nominee of - CII/FICCI/ASSOCHAM/PHDCCI
24. Advisor (Cost)
25. Nominee of MCA
26. Nominee of CBEC
27. Nominee of CBDT
28. Nominee of ICAI
29. Nominee of ICSI

Secretary
CMA J.K. Budhiraja, Senior Director (Technical)

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 The Institute of Cost Accountants of India 
(Council Committees for the year 2016-17)

20. Disciplinary Committee U/s 21D 21. Coordination Committee of The Institute of Cost
(Quorum: 2) Accountants of India, The Institute of Company
Secretaries of India and The Institute of Chartered
Chairman Accountants of India
1. CMA Manas Kumar Thakur, President (Quorum: 2)

Members Chairman
2. CMA P.V. Bhattad, IPP 1. CMA Manas Kumar Thakur, President
3. Disciplinary Committee U/s 21D - Government
Nominee Members
2. CMA Sanjay Gupta, Vice- President
Secretary 3. CMA P.V. Bhattad, IPP
CMA Kaushik Banerjee, Secretary 4. CMA H. Padmanabhan

Secretary
CMA Tarun Kumar, Joint Director (President's Office / Vice
President's Office)

President and Vice President are Permanent Invitees to all the Committees except Disciplinary Committees.

Office bearers of Regional Councils for the year 2016-2017

EIRC SIRC

Name Position Name Position

CMA Bibekananda Mukhopadhyay Chairman CMA V. Murali Chairman

CMA Pranab Kumar Chakrabarty Vice Chairman CMA Dr. A. Mayil Murugan Vice Chairman

CMA Ashis Banerjee Secretary CMA Suresh R. Gunjalli Secretary

CMA Cheruvu Venkata Ramana Treasurer CMA Jyothi Satish Treasurer

NIRC WIRC

Name Position Name Position

CMA Ravi Kumar Sahni Chairman CMA Pradip H. Desai Chairman

CMA Sunil Kr. Singh Vice Chairman CMA Kailash R. Gandhi Vice Chairman

CMA Anil Sharma Secretary CMA Laxman.D. Pawar Secretary

CMA Rajendra Singh Bhati Treasurer CMA Shriram N. Mahankaliwar Treasurer

www.icmai.in August 2016 l The Management Accountant 17

 ICAI-CMA SNAPSHOTS

CMA Manas Kumar Thakur, President and CMA Sanjay Gupta, Vice-President of the Institute felicitating
Shri Arun Jaitley, Hon'ble Union Minister for Finance and Corporate Affairs at his office on July 28, 2016.

18 The Management Accountant l August 2016 www.icmai.in

 ICAI-CMA SNAPSHOTS
CMA Manas Kumar Thakur, President and
CMA Sanjay Gupta, Vice-President of the
Institute met with Colonel Rajyavardhan
Singh Rathore, Hon’ble Minister of State for
Information and Broadcasting
CMA Manas Kumar Thakur, President of the Institute being felicitated by
the Council Members and CMA Kaushik Banerjee, Secretary of the Institute
on July 22, 2016 at the Institute headquarters in Kolkata
www.icmai.in August 2016
CMA Manas Kumar Thakur, President of the
Institute and CMA Sanjay Gupta,
Vice-President of the Institute felicitated Shri
Arjun Ram Meghwal, Hon’ble Minister of
State for Finance and Corporate Affairs on
July 28, 2016
CMA Manas Kumar Thakur and CMA Sanjay Gupta, President and
Vice-President of the Institute felicitating Shri Santosh Kumar Gangwar,
Hon’ble Minister of State for Finance. CMA Amit Apte,
CMA Niranjan Mishra, Council Members and
CMA SK Bhatt, Chairman, NIRC are also seen
l The Management Accountant 19
 ICAI-CMA SNAPSHOTS

CMA Manas Kumar Thakur and CMA Sanjay Gupta, Newly Elected President and Vice President of the Institute respectively, CMA PV Bhattad,
Immediate Past President of the Institute in the middle along with the Council Members, CMA Papa Rao Sunkara, CMA Biswarup Basu,
CMA Dr I Ashok, CMA Avijit Goswami, CMA Amit Anand Apte, CMA Ashok B. Nawal, CMA P Raju Iyer, Prof Surender Kumar,
CMA Niranjan Mishra, CMA Dr PVS Jagan Mohan Rao and Secretary of the Institute, CMA Kaushik Banerjee at the
Headquarters of the Institute on July 22, 2016 in Kolkata.

CMA Sanjay Gupta, Vice-President of the Institute being felicitated by the
Council Members and CMA Kaushik Banerjee, Secretary of the Institute on
July 22, 2016 at the Institute Headquarters in Kolkata
Mrs. Rani Singh Nair, IRS, Chairperson, Central Board of Direct Taxes
being felicitated by CMA Manas Kumar Thakur, President,
CMA Sanjay Gupta, Vice-President,
CMA P Raju Iyer, and CMA Balwinder Singh, Council Members of the
Institute

20 The Management Accountant l August 2016 www.icmai.in

 ICAI-CMA SNAPSHOTS

Shri Najib Shah, IRS, Chairman, Central Board of Excise & Customs
being felicitated by CMA Manas Kumar Thakur, President,
CMA Sanjay Gupta, Vice-President,
CMA P Raju Iyer and CMA Balwinder Singh,
Council Members of the Institute
CMA Manas Kumar Thakur and CMA Sanjay Gupta, President and
Vice-President of the Institute, CMA Amit Apte, Council Member of the
Institute felicitated Smt Aruna Sethi, Addl. Chief Adviser (Cost), Ministry
of Finance

CS Mamta Binani, President, ICSI visited New Delhi office of the Institute CMA Manas Kumar Thakur, President,
to greet the newly elected President and Vice-President of the Institute, CMA Sanjay Gupta, Vice-President,
CMA Manas Kumar Thakur and CMA Sanjay Gupta respectively on 28th CMA Amit Apte and CMA Niranjan Mishra,
July 2016. CS Vineet K Chaudhary, Council Members of the Institute met with
Council Member, ICSI is also seen Shri Tapan Ray, IAS, Hon’ble Secretary to the
Government of India, Ministry of Corporate Affairs

CMA Manas Kumar Thakur, President and CMA Sanjay Gupta, Vice-President of the Institute felicitated
Shri R Asokan, Advisor (Cost), Cost Audit Branch, Ministry of Corporate Affairs. CMA Amit Apte, CMA Niranjan Mishra, Council
Members and CMA Kaushik Banerjee, Secretary of the Institute are also seen.

www.icmai.in August 2016 l The Management Accountant 21

 Discussion Meet on
Cost Management Issues in Higher Education Sector

The Directorate of Research and Journal of the Institute organized a Discussion Meet on ‘Cost Management Issues in Higher
Education Sector’ on June 24, 2016 at EIRC auditorium of the Institute. CMA Dr Debaprosanna Nandy, Director, Research and
Journal of the Institute commented that the objective of such a discussion was to prepare a concept note that would be forwarded
to the policymakers for consideration. CMA Manas Kumar Thakur, Vice President of the Institute in his special address expressed his
gratitude towards the Indian government for its initiative in introducing Cost Audit in Higher Education Sector. He spoke about the
rich heritage of Indian universities. Takshashila University and the Nalanda University were reputed and attracted students from all
over the world. Nabadwip, known as the Oxford of the east, was a center of Sanskrit and philosophy in medieval India and The Navya
Nyaya school of logic (which originated in India) soared high under the philosophers of Nabadwip. He expressed his concern as the
Indian higher education sector has fallen from such richness to a dismal state. He opined that the initiative of the Indian Government
in introducing cost audit is a step in right direction as the role of Cost and Management Accountants is crucial for resource analysis
in higher education sector. CMA Harijiban Banerjee, Past President of the Institute presided over the meeting, highlighted the
importance of higher education for economic development of the country. He expressed his optimism regarding the role of the Institute
in restoring cost effectiveness in higher education sector. Professor Dhrubojyoti Chattopadhaya, Vice Chancellor, Amity University,
Kolkata the moderator of the session, made an interesting observation as he pointed that the Indian higher education sector passed
through significant periods. In ancient times, Indian higher education was globalised as students from as far as Babylonia, Greece,
Syria, Arabia, Phoenicia and China came to study in Takshashila and Nalanda. But subsequently the Indian Higher Education sector
underwent sea changes as it became localized and existed in isolation. And after a century long slumber, the Indian higher education
woke up to the call of globalization to find itself strayed amidst the international education scenario. Professor Chattopadhaya opined
that the education sector is critical as on one there is the question of ‘education for all’ and on the other, there is the question of
effective cost management, pivoted around input-output analysis which makes the educational entities sustainable. Professor Asitava
Jana, Ph. D (Education Policy/Higher Education, Florida State University), Education Information System, Policy Evaluation, and
Cost Consultant, the key note speaker of the Meet presented a sketch that landscaped the higher education scenario in America. He

22 The Management Accountant l August 2016 www.icmai.in

made a comprehensive analysis of an array of economic and social benefits (public and private) of higher education and stressed the
intervention of the state for ensuring ‘education for all’. He emphasized that higher education directly contributes in creating human
capital and is also instrumental in building up the social capital. Professor Jana, very interestingly, pointed out that the value system,
which is an important ingredient of higher education, of the Indians residing in America is stronger than the American people. Professor
Jana noted that higher education institutions in America are categorized as public or private which are further classified as ‘for-profit’
and ‘not-for-profit’ entities. From a slide presented by Professor Jana, it had been observed that ‘for-profit’ private institutions (Degree
granting institutions) which were a mere one percent of the total private institution in 1980-81 have increased to 32 per cent in 2011-12.
Professor Jana also pointed that the public institutions (4 year degree granting) have significantly declined from 28 per cent in 1980-81
to 23 per cent in 2011-12 highlighting declining role of the state in higher education sector. Professor Jana presented a comprehensive
list of revenue sources of the higher education institutions in America. According to his power point presentation it is evident that
American higher education sector is dominated by private (for-profit and not-for profit) research institutes where revenue generation
is highest during the period 2003-2013. Professor Jana cited the Delta Cost Project Report (January 2016) to illustrate that there has
been a steady increase in net tuition revenue accompanied with a decline in state and local appropriation during the period 2003-2013
which heightened after the recession. As a result, by 2013, revenue from state and local appropriations at public bachelor’s institutions
nearly equaled that from net tuition revenue, and the increase in public funding at public research and master’s universities were not
enough to reverse the growing gap between that funding and funding that comes from net tuition. Thus, significant conclusion can
be drawn from Professor Jana’s lecture. ‘Education for all’ is not the guiding criterion in American higher education landscape. Rather
cost management and ‘input-output’ analysis are important factors. The participant institutions are depending more on net tuition fees
from students rather than on state and local appropriations, specifically after the recession. Professor Dhrubojyoti Chattopadhaya
also forwarded some additional issues in respect to the Indian higher education scenario. He pointed in India, proportionately low
percentage of GDP spending on higher education and high rate of population growth are two critical obstacles in the higher education
scenario. In spite of several initiatives by Government of India in facilitating public-private ownership in higher education, the ‘for –
profit’ form of higher education institutions is prohibited to operate in Indian higher education sector. The ‘not-for-profit’ institutions
are the preferred private players which are required to plough back their profits for infrastructural developments. Unlike the American
higher education sector, majority of higher education institutions in India are public institutions signifying a ‘parental’ role of the state
for ensuring ‘education for all’. Participants also made several comments regarding the higher education system in India and the issue
of employability in higher education was also questioned. CMA Biswarup Basu, Council Member of the Institute gave the formal vote
of thanks and concluded the Discussion Meet.
Prof. Joydip Dasgupta
Nabadwip Vidyasagar College

www.icmai.in August 2016 l The Management Accountant 23

 Glimpses of

1st National Conclave for

Members in industry

24 The Management Accountant l August 2016 www.icmai.in

www.icmai.in August 2016 l The Management Accountant 25
26 The Management Accountant l August 2016 www.icmai.in
www.icmai.in August 2016 l The Management Accountant 27
 37th Cost Conference – 2016
E
I
R
C
The Institute of Cost Accountants of India (ICAI) – Eastern India
Regional Council had organized the 37th Cost Conference at Science City,
Kolkata on 11th and 12th June, 2016.
The Conference was inaugurated by Shri Sobhandeb Chattopadhyay,
Hon’ble Minister in-charge, Power & Non-Conventional Energy Sources,
Government of West Bengal on 11th June, 2016 (Saturday). Rear Admiral
A K Verma, CMD of Garden Reach Ship Builders & Engineers Ltd. was
Guest of Honour. Shri Amit Sinha, Executive Vice President of NSDL and
Swami Suparnananda ji Maharaj, Secretary of The Ramakrishna Mission
Institute of Culture, Kolkata were the special guests. CMA Manas Kumar
Thakur, Vice President of ICAI also addressed the participants in the
inaugural session. CMA Shiba Prasad Padhi Chairman delivered the
welcome address.
The 2-day Conference was focussed on the theme “Managing cost
and taking successful business decisions - Competency of CMAs" and
had the deliberations by the eminent experts from different sectors on
Manufacturing, Mining, Service, MSME, Power and other service Sectors
apart from a CFO Meet and Panel discussion on GST.
The 1st Technical Session was on Manufacturing & Mining. The session
was chaired by CMA H Padmanabhan, CCM, ICAI & moderated by CMA
(Dr.) I Ashok, CCM, ICAI. CMA Shyamal Bhattacharyya, Member, ICAI-
EIRC offered the vote of thanks.
(a) Managing cost and taking successful business decisions –
Best Practices in Aluminum Industry was addressed by CMA B K Dash,
AGM (Finance), NALCO Ltd., Bhubaneswar
(b) Managing cost and taking successful business decisions – Best
Practices in Mining Industry was addressed by CA. CMA S B Mahapatra,
Consultant and Sr. Faculty of IICM, Ranchi
(c) Managing cost and taking successful business decisions –
Best Practices was addressed by CA. CMA CS Arun Kedia CFO, EMC Ltd.,
Kolkata.
The 2nd Technical Session was on MSME. CMA Avijit Goswami, CCM,
ICAI was the Chairman of the session & CMA Cheruvu Venkataramana,
RCM, ICAI introduced the dignitaries. The session was moderated by CMA
(Dr.) D P Nandy, Director (Research & Journal), ICAI. Shri Saumyajit Guha,
COO, Calcutta Angels Network, Kolkata, CA. CMA Kalyan Kar, Founder
& MD, Inthink Knowledge Ventures, Kolkata & Ms. Ushoshi Sengupta,
Founder & CEO, TES, Kolkata (also the Miss India Universe of 2010) were
the panelists. At the end of session CMA Bibekananda Mukhopadhyay,
Vice-Chairman, ICAI-EIRC offered the vote of thanks.
28 The Management Accountant l August 2016
The 3rd Technical Session was on CFOs Meet. The Session was chaired
by CMA Sanjay Gupta, CCM, ICAI and moderated by CMA Biswarup Basu,
CCM, ICAI. CMA Sabyasachi Mitra, Director (Finance), Howden Solyvent
(India) Pvt. Ltd. & CMA Sudip Datta, COO, IL &FS IDC Ltd., Kolkata
addressed the session as speakers. CMA Ashis Banerjee, Treasurer, ICAI-
EIRC proposed the vote of thanks.
The 4th Technical Session was a Panel Discussion on GST. CMA
A B Nawal, Chairman, Indirect Taxation Committee, ICAI moderated
the session. Janab Khalid Anwar, Joint Commissioner, Directorate of
Commercial Taxes, Govt. of W.B., CMA T B Chatterjee, Sr. Vice President
& Company Secretary, DIC India Ltd., Kolkata, CMA Debasis Ghosh,
Director, Deloitte Haskins & Sells LLP, Kolkata and CMA Mrityunjay
Acharjee, Sr. VP, Balmer Lawrie & Co. Ltd., Kolkata were the panelist.
Vote of Thanks was offered by CMA (Dr.) Umar Farooque, Member,
ICAI-EIRC
The 5th Technical Session was on Power & Services Sector. CMA
Niranjan Mishra, CCM, ICAI was the Chairman of the session. CMA Raju
Iyer, CCM, ICAI moderated the session. Shri Amit Sinha, Executive VP,
NSDL, Mumbai addressed on NPS. Dr. Jayanta Kumar Seal Associate
Professor, IIFT, Kolkata addressed on Cost and Management Accounting
practices followed in Ports. Shri Vibhor Tandon, Asst. VP, MCX India Ltd.
& Shri Diptendu Moulik, Sr. Executive, MCX of India Ltd. addressed on
Commodity Futures & Derivatives, CMA K P.Gupta, GM (Finance), Cost
& Budget, NTPC Ltd. addressed on Power & Shri Debashis Mukherjee,
General Manager (Credit), UBI, Kolkata addressed on Cost and
Management Accounting practices followed in Banks.
CMA Bibekananda Mukhopadhyay extended his whole hearted thanks
to all the speakers, Guests, Delegates, Past Chairmen, Past Presidents,
CCMs, RCMS, Vice President, Presidents, sponsors, advertisers, Institute
Officials for extending their support & making the conference a grand
success.
More than 350 participants from industry, practitioners, corporate
houses, government departments, Chapters representatives and
academicians attended the Conference.
CMA Tapas Paul, a member of the Institute was felicitated on the
occasion for his yeomen service to the CMA profession through his
initiative CMA Next Step. Asansol Chapter was also felicitated for
excellent performance for organizing campus placement & placing the
qualified students in different MNCs.
www.icmai.in
 National Seminar on
C OST M A N AG E M E N T
IAA Research Foundation organized a national
seminar on ‘Cost Management’ in association with the
Institute on July 9, 2016 at J N Bose Auditorium of the
Institute. CMA Prof Bhabatosh Banerjee, President, IAA
Research Foundation at the inaugural session discussed
about promoting fundamental and applied research in
accounting and allied subjects. CMA Harijiban Banerjee,
past president of the Institute was the chief guest of
the session and spoke elaborately on cost management
issues. He is optimistic that this joint initiative of the
seminar would definitely pave the way towards positive
output on cost management. For this he also asserted
the research areas needs to be strengthened. CMA
Prof Dhrubaranjan Dandapat, secretary, IAARF, gave
the hearty vote of thanks and concluded the session. At
the GD Roy Memorial Lecture, Prof DV Ramana, Xavier
Institute of Management, Bhubaneswar detailed on ‘Cost
to Serve and Tariff Rationalization in Power Sector’. Prof
L.S Porwal, Former Professor, Delhi University and one
of the senior most members of the Research Foundation
had been felicitated for his outstanding contribution to
accounting education and research. CMA Rudranil Roy,
Head of Finance, General Electric gave a brief presentation
on Cost Leadership and discussed on the importance of
cost leadership including high levels of productivity,
high capacity utilization, lean production methods etc in
the technical session I. CMA Prof Kartick Chandra Paul,
Professor, Department of MBA, Vidyasagar University
was the moderator and Dr Tanupa Chakraborty, Associate
Professor, Department of commerce, CU anchored the
session. In the technical session II, CMA Dr Jayanta Kumar
Seal, Associate Professor, IIFT explained the Management
Accounting Practices in port sector including the brief
overview of the port sector in India with special emphasis
on Chennai Port. He detailed the business process
reengineering techniques, the Activity based costing
practiced in Chennai Port Trust, Break Even Analysis etc.
CMA Dr Debaprosanna Nandy, Director, Research and
Journal of the Institute was the moderator of the technical
session II and Prof Ashish Kumar Sana, Calcutta University
concluded with the vote of thanks. The seminar ended
with a brief presentation by Shri Vibhor Tandon , Assistant
Vice President (AVP), Multi Commodity Exchange of India
Ltd and Shri Diptendu Moulik, Senior Executive, Multi
Commodity Exchange of India Ltd. on commodity market.

www.icmai.in August 2016 l The Management Accountant 29

COVER STORY
Skill Development for
capacity building –
Telecom Industry
CMA Dr. M. Govindarajan
Sr. Accounts Officer (Taxation),
BSNL, Madurai
Skill Development
Skill development is defined as an ability and capacity
acquired through deliberate, systematic and sustained
effort to smoothly and adaptively carried out complex
activities or job functions involving ideas (Cognative skills),
things(technical skills), and/or people (interpersonal skills).
Skill development – why required?
The education system prevailing in India is not giving
importance on training young people in employable
skills which can provide them with proper employment
opportunities. Many of the States are still lacking in
educational background and also skill development. In the
present international scenario it is great challenge to our
country. For the economic growth of our country 75% of new
job opportunities are expected to be skill based. Therefore
the Government is emphasizing on upgrading people’s skills
by providing vocational education and training to them.
The Finance Minister in his Budget Speech of 2013
proposed a scheme to encourage skill development for youth
by providing monetary rewards for successful completion of
30 The Management Accountant l August 2016
approved training programs.
The Central Government has approved the ‘Pradhan Mantri
Kaushal Vikas Yojana’. The Government has allotted an outlay
of Rs.1500 crore to train 24 lakh persons. The scheme would
be based on the National Skill Qualification Framework and
industry led standards. The training includes soft skills,
personal grooming, behavioral change for cleanliness, good
work, ethics etc.,
The National Skill Certification and Monetary Reward
Scheme have been introduced. The main objectives of this
scheme are-
 To encourage standardization in the certification
process and initiate a process of creating a registry
of skills; and
 To increase productivity of the existing workforce and
align the training and certification to the needs of
the country.
 To provide Monetary Awards for Skill Certification
to boost employability and productivity of youth by
incentivizing them for skill trainings
 To reward candidates undergoing skill training by
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 authorized institutions at an average monetary reward
of Rs. 10,000 (Rupees Ten Thousand) per candidate.
 To benefit 10 lakh youth at an approximate total cost of
Rs. 1,000 Crores. capacity building is for the elaboration of management structures,
Capacity building
Capacity is the ability of the individuals, organizations etc.,
to perform functions effectively, efficiently and sustainably.
Capacity building is an evidence-driven process of strengthening
the abilities of individuals, organizations, and systems to perform
core functions sustainably, and to continue to improve and
develop over time.
United Nations, in the year 1970, created the term ‘capacity
building’. Since this phenomenon is accepted by the International
Organizations, it spreaded all over the world and gained
importance. The capacity building involves three levels of
activities which are-
 Individual;
 Organization; and
 Institutional.
In respect of individual ‘capacity building’ is the process for
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equipping himself with the understanding, skills, access to
information, knowledge and training which enables him to
perform efficiently and effectively. In respect of organizations, the
process and procedures not only within the organization but
also the management of the relationships between different
organizations. In respect of institutions, capacity building is
making legal and regulatory changes to enable organizations,
institutions and agencies at all levels and in all sectors to increase
their capacities effectively.
Definition
United Nations Environment Programme (UNEP) recognizes the
capacity building as a long term, continuing process in which all
the stakeholders participate. UNEP defines the capacity building
as-
 The creation of an enabling environment with appropriate
policy and legal frameworks;
 Institutional development, including community
participation;
 Human resources development and strengthening of
managerial systems.
August 2016 l The Management Accountant 31
COVER STORY
United Nations Environment Program (UNEP) defines ‘capacity
building’ as building abilities, relationships and values which will
enable the organizations, groups and individuals to improve their
performance and achieve their development objections. It was
also described by UNEP as initiating and sustaining a process
of individual and organizational change which can equally refer
to change within a State, Civil Society or the private sector, as
well as a change in process that enhance co-operation between
different groups of society.
The above definition for ‘capacity building’ emanates three
main aspects-
 It is the catalyst and constant fuel for a process of change;
 The importance of the building institutional capacity; and
 Involvement of wide range of different groups in a society.
Capacity Building is a long-term, continuing and complex
process, which depends on the participation and constant
interaction between all the involved stakeholders. Capacity
Building Strategies and Approaches demand a high degree of
flexibility. The demand for capacity building may vary enormously
between countries, regions and sectors and the demand for
capacity building is constantly changing.
Ways to increase the effectiveness of capacity building
The following are the ways to increase the effectiveness of
capacity building, identified by UNEP-
 Identifying needs and building on existing capacities;
 Being clear about the objectives;
 Using a wide range of capacity building approaches;
 Target the right people to build a critical mass;
 Making the training-of-trainers approach work;
 Institutionalizing capacity building programs regional and
national level.
Skill development a part of capacity building
Since the process of capacity building is to promote sustainable
development, more attention needs to be drawn in the area of
32 The Management Accountant l August 2016
skill development. The sustainable development is a broad and
encompasses a multitude of activities. Capacity building includes
builing abilities, relationships and values. The abilities in an
economic is attained only through the skill development of the
employees, officers etc., Thus the skill development is one of
the important factors for capacity building and sustainable
development.
Skill development for capacity development in
Telecom Industry
Telecom industry is not having any exception to adopt the skill
development. Telecom industry is one of the important forces in
the country that has great potential in employment, economic
growth, FDI intake etc., The industry contributes 3% of GDP.
National Telecom Policy, 2012
The following are the objects of the National Telecom Policy of
the Government of India-
 One nation, one licence regime with no roaming charges
and nationwide number portability;
 Unified licensing, de-linking of spectrum from license,
online real time submission and processing;
 Liberalization of spectrum and convergence of network,
services and devices;
 Broadband for all with a minimum download speed of 2
Mbps;
 Increase rural tele-density 70% by 2017 and 100% by
2020.
Overview of Telecom Industry
Telecommunication is among the largest sectors in terms of
contribution to the GDP. The Telecom industry has the following
sectors-
 Service providers;
 Infrastructure providers;
 Network and IT vendors;
 Telecommunication equipment manufacturers; and
 Retail and distribution.
The following are the key developments in the
Telecommunication industry since the past years-
 Unified licence;
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  Relaxed FDI norms;  Financial support through USO Fund;
 Establish internet connections;  Relaxing Merger and Acquisitions.
 Expansion to rural areas;’

Subscriber data as on 30.04.2016

The highlights of telephone subscription data as on 30.04.2016 is indicated in the following table-

Paritculars Wireless Wire line Total

Telephone subscribers’ data Urban subscripers (in million) 586.41 20.80 607.21

Rural subscribers (in million) 447.84 4.23 452.08

TOTAL (in millions) 1034.25 25.04 1059.29

www.trai.gov.in

Particulars Wireless Wire line Total

Overall Teledensity Urban 147.90 5.25 153.14

Rural 51.19 0.48 51.67

Overall 81.35 1.97 83.32

www.trai.gov.in

Telecom operators  Reliance;

In the wireless wing, the following are the operators are  Quadrant;
rendering services-  Vodafone;
 Bharti Airtel;  Sistema.
 Vodafone;
 Reliance; The following are the infrastructure providers:
 Aircel;  Indus;
 BSNL;  BSNL;
 TATA;  MTNL;
 Telenor;  Reliance Infratel;
 Sistema;  Viom Networks;
 Videocon;  Bharti Infratel;
 MTNL;  GTL;
 Quadrant.  American Towers.

The following are the network and IT vendors-

In the wire line wing the following operators are  Tech M;
rendering services-  TCS;
 BSNL;  Wipro;
 Bharti Airtel;  Infosys;
 MTNL;  HCL Infotech;
 TATA;  Sasken.

www.icmai.in August 2016 l The Management Accountant 33

COVER STORY

The following are the top players telecom equip-  Application Testing;
ment manufacturing sector-  ERP implementation/integration;
 Ericcson;  Network planning;
 NSN;  Data networking;
 ZTE;  Mobile application development and value added services.
 Huwaei;
 Alcotel-Lucent; Required skills for telecom jobs
 Samsung. The product companies highly require engineering
graduates having the back ground of computer, electronics
The following are the top players in retail and or telecommunication engineering having the knowledge of
distribution sector- computer architecture and systems design. The application
 Samsung; development and maintenance provides require application
 Micromax; developers with strong programming skills in data base and
 Karbonn; GUI development. Skills like coding and software testing are
 Apple; highly required for the development domain of the industry.
 HTC; The entry level in the industry may vary from a management
 Black berry; trainee to an executive of any vertical in the present day telecom
 Lava; industry.
 LG; The major skills required are-
 Sony;  Core technical skills – electrical concept and equipment
 Spice; handling;
 Zen;  Project Management;
 ZTE.  Technical know-how;
The total number of broadband subscribers are as detailed  Innovation;
below-  Active infrastructure management;
 Analytical skills;
 Operation management;
 Responsiveness and reliability;
 People Management;
 Training on OHS;
 Machine operating skills;
 Advanced skills for new technology;
 Revenue assurance;
 Cost optimization and efficient enhancement;
 Customer Relationship Management;
 Understanding of market and customer requirements;
 Presentation skills, etc.,
 Wired subscribers – 17.05 million;
 Mobile device users – 133.49 million; Challenges for operators
 Fixed wireless subscribers (Wi-Fi, Wi-Max, Point-to-Point In the recruitment of manpower process the operators are
Radio & VSAT – 0.59 million. facing the following challenges-
 Total 151.09 million.  The candidates are lack in exposure, technical in-depth,
analytical and logical reasoning;
Employment potential  The institutes imparting the required qualifications for the
The employment potential in the telecom industry is very Telecom industry are very less in the country;
high. The CAPEX is required in large for the operators and also  High attrition rate in entry levels poses a significant
skilled manpower to cope up with the latest technologies and challenge for operators;
apply the same in providing the services to the subscribers. The  The candidates selected fail to develop a combination of
industry offers a wide range of opportunity as detailed below: skills, resourcefulness and entrepreneurial abilities.
 Application/Product Development;

34 The Management Accountant l August 2016 www.icmai.in

Incremental requirement of Human resources
KPMG Analysis indicates the following requirement of human
resources for various sectors in telecom industry by the year
2022:
 Service providers – 1187378;
 Infrastructure – 130888;
 Equipment manufacturing – 635821;
 Network and IT vendors – 768391;
 Retail – 1438865.
Skill development training
Department of Telecom (DoT) is the licensing authority for
Telecom Industry. The DoT constituted an apex body for skill
development in Telecom industry to put in place an integrated
skill development strategy for the converged ICT sector as a
whole, in pursuance of strategy outlined in Chapter IV.8 of
National Telecom Policy on 22.04.2013. The Apex Body will be
supported by Advisory Groups comprising representatives from
industry, academia, PSUs etc. Chairpersons of Advisory Groups
will be observer members of the Apex Body. The mandate of
the Apex Body will be to oversee and act as guiding and enabling
source for all aspects related to skill development in Telecom
Sector. The apex body will meet once in six months.
As provided in NTP-2012, the Apex Body is to be supported
by Advisory Groups comprising representatives from industry,
academia, PSUs etc. Accordingly, Advisory Group on Capacity
building has been constituted on 28.06.2013. The Advisory
Group will be Standing Group as wide varieties of subjects linked
with Skill development initiatives need to be dealt with over a
period of time. The Advisory Group will also be responsible to
present the matters before the Apex Body for seeking strategic
direction/ decisions, as well as informing the Apex Body about
the initiatives undertaken and progress made.
On 28.06.2013 itself the DoT constituted another advisory
group on ‘Content, Quality and Examination Framework. This
Advisory Group is expected to focus on Quality with a content
driven approach for development of National Occupation
Standards, Course Content as per identified Skill Gaps,
framework for certification/accreditation and to promote R&D,
standardization & domestic telecom equipment manufacturing.
The mandate of the Group is to examine and evolve the guiding
principles/approach specifically focusing on the strategies
enunciated in NTP-2012.
As per para 8.2 of the National Telecom Policy, National
Telecom Institute for Policy Research, Innovation and Training
(NTIPRIT) was constituted. In order to strengthen and develop
as an institute of international repute, for capacity building and
enabling research in India centric technologies and policies in
telecom domain it was considered appropriate that, to begin
with, the training centers of BSNL/ MTNL may be registered with
www.icmai.in August 2016
NTIPRIT to provide the initial momentum to the Skill building
initiatives in the Telecom Sector. The following training centers
were registered with NTIPRIT-
 Seventeen premier Telecom Training Centers of BSNL
which are spear-heading BSNL skilling initiatives;
 Institute of Telecom Technology and Management, MTNL,
Delhi;
 Centre for Excellence in Telecom Technology and
Management, MTNL, Mumbai
The DoT followed with the skill development process. On
22.01.2016 the DoT reached an agreement with Ministry of Skill
Development and Entrepreneurship (MSDE) to make concerted
joint efforts towards skill development and are in agreement to
work together to undertake various activities.
Role of private operators
 Ericsson’s EMPOWER is a telecommunications certification
programme that combines practical knowledge with
simulated training, to empower and make young
telecommunications engineers industry ready. Ericsson
launched its brand, ‘Empower’, in September 2009,
and joined hands with 12 engineering institutions and
currently has association with 75 universities/technical
education institutes across India;
 Indus Towers runs a certification programme for two
months to equip students in Cell Site Maintenance;
 Vodafone Essar & Texas Instruments, in association
with IIT, Karagpur - Next generation network (NGN) and
network technology;
 Bharti Airtel, in association with IIT, Delhi -
Telecommunications technology and management of
infrastructure;
 Aircel & Texas instrument, in association with IISC,
Bangalore - Information security and disaster
management of infrastructure;
 BSNL & Alphion, in association with IIT, Kanpur -
Technology integration, multimedia and computational
mathematics;
 BSNL & Alphion, in association with IIT, Chennai –
Telecommunication infrastructure and energy;
 TTeleservices, in association with IIT, Mumbai – Rural
applications;
 Idea Cellular, in association with IIM, Ahmadabad - Policy,
regulation, governance, customer care and marketing.
Recommendations
KPMG in its report ‘Human Requirements and Skill requirements
in the Telecommunication Sector to National Skill Development
Corporation under the Ministry of Skill Development &
Entrepreneurship, recommended the following for further skill
l The Management Accountant 35
COVER STORY

Every industry is to take care of its sustainable development in the long run. Capacity
Building is the tool for the same. The International Organizations adopt various
methods to increase the effectiveness of capacity building for sustainable development.
Skill Development is one of the methods in capacity building. Skill development gains
importance in India by the present Government. Telecom Industry is one of forces in
India which contributes much to GDP. The sustainability of the industry is essential
for the economics of the country and for the consumers to reach the latest technology of
communication. This article discusses about the various skill development required for
the industry and the initiatives taken by the Government and the private operators to
impart skill development for the capacity building of the industry

development to Telecom Industry-
 To include telecommunications and related areas as super
specializations in Engineering and MBA Colleges;
 To increase focus on soft skills;
 To introduce funding schemes to train potential
candidates;
 To develop PPP models in training for infrastructure
sharing;
 To develop certified training programs that help trainees
‘earn while they learn’;
 To provide incentives to employees working in remote
tower sites;
 To create a central database for telecommunication
employees;
 To create an eco system for engineering graduates.
Role of International Telecom Union (ITU)
The ITU constituted Global ICT Capacity Building Symposium
(CBS). It is the main global event for capacity development in
the field of information and communication technology (ICT).
This Symposium brings together stakeholders from across the
world to discuss trends and developments in the sector and their
implications for human and institutional capacity building. The
symposium initially focused only on matters related to human
resources. It has further broadened its scope to embrace human
and institutional capacity building, drawing on a global network
of expertise from different regions and stakeholders.
The outcomes of the Symposium will provide strategic guidance
to the national and international countries. The guidance will
include ITU on capacity building in the field of ICT, and on
strengthening collaboration among the global ICT capacity
building community. The Symposium provides a forum for
universities and other training providers to gauge the needs of the
market in terms of training and capacity building in the field of
ICT, and helps them shape their training and delivery programmes.   govind.ayyan@gmail.com
The next Capacity Building Symposium will take place in
Nairobi, Kenya. The program will be from 6th September to
8th September, 2016. This symposium will be organized by the
Telecommunication Development Bureau (BDT) of the ITU. It is
hosted by the Communication Authority of Kenya. The theme
of the symposium is ‘Embracing Capacity Building Opportunities
in the Digital Era’. Global leaders have adopted the Sustainable
Development Goals (SDGs) as successor to the Millennium
Development Goals (MDGs). The prescribed goals are to be
achieved at a time of major digital technology transformation
which will impact the way people live and societies operate. The
Internet of things (IoT) is the emergence of new technology. This
technology is at the increase and becomes a reality. The advent
of smart cities and smart societies, as well as the growth of big
data, require different sets of knowledge and skills across all
sections of society.
Conclusion
Governments, industry, universities and other higher education
institutions  need to invest in, and develop a range of ICT skills at
various levels of immersion, which will not only enable increased
participation in the economy, but will ensure the creation of
digital citizens for a digital society. MA
Reference:
1. www.dot.gov.in
2. www.nscindia.org
3. www.trai.gov.in
4. www.itu.net
5. Report – Human Resources and Skill requirements in the Telecom
Sector (2013-17, 2017 – 22)
6. Press Release No.49/2016 of TRAI, dated 20.06.2016.

36 The Management Accountant l August 2016 www.icmai.in

 COVER STOR
Strengthening Accounting
in Primary Agricultural
Cooperative Societies

T
he cooperatives in India are more than a
century old. The emergence of cooperatives
in a formalized form can be traced to the
CMA Gopala Krishna Ayitam passing of the “Cooperative Credit Societies
Consultant Act, 1904” even though some of the
Cactus Consulting cooperatives may have been established prior
Secunderabad

www.icmai.in August 2016 l The Management Accountant 37

COVER STORY
to that. Subsequent legislative initiatives include Cooperative
Societies Act, 1912 which provided for the formation of non-
credit societies and federal cooperative organisations. Provinces
like Bombay, Madras, Bihar, Orissa and Bengal enacted their
own cooperative laws on the lines of the 1912 Act. In 1942, the
government enacted the Multi Unit Cooperative Societies Act
which was an enabling instrument for incorporation and winding
up of cooperative societies.
The Short Term Credit Cooperative Structure (STCCS) is spread
throughout the length and breadth of India with the presence
of one Primary Agricultural Cooperative Societies (PACS) on an
average in every sixth or seventh census village. The only other
network that has similar geographical spread is the India Post.
As at 31st March 2014 there are 93,0421 PACS in India as against
154,8822 Post Offices as on the same date.
The grass-root level PACS are supported by the federated
structures at the district level – District Central Cooperative
Bank (DCCB); state level State Cooperative Bank (StCB). With
the exception that in some States two tier system exits viz., PACS
and StCB. Within a state the StCB plays the role of an apex level
entity at the state level and respective DCCB plays the role of an
apex level entity at the district level or for a cluster of districts.
Significance of Cooperatives:
The significance of PACS can be highlighted with the following:
the share of cooperatives in the institutional credit to agricultural
was as high as 62% in the year 1992-933, even though this has
been declining nationally (17% in 2011-124) in some states it is
still more than 50%5 ; during the year 2011-12 the cooperatives
provided agricultural credit to 30.9 million farmers as compared
to 25.5 million farmers by the commercial banks and 8.2 million
farmers by Regional Rural Banks (RRBs)6.
Reforms to address Challenges:
The Royal Commission on Agricultural observed that if
cooperation fails there will fail the best hope of rural India7.
Notwithstanding such importance of the STCCS, these entities are
repeatedly challenged on their poor governance and management
and financial health. The following extract from the STCCS Revival
Package emphasises the needed reforms to strengthen the STCCS
and thus contains the message on challenges that STCCS faces:
“The Revival Package was aimed at reviving the short term rural
cooperative credit structure (CCS) and make it a well-managed
and vibrant medium to serve the credit needs of rural India,
especially the small and marginal farmers. It seeks to (a) provide
financial assistance to bring the system to an acceptable level
of health; (b) introduce legal and institutional reforms necessary
for their democratic, self-reliant and efficient functioning; and (c)
take measures to improve the quality of management. It is to be
emphasized that all three components are equally important and
should be treated and implemented as an integrated package” 8
Steps taken to Strengthen Accounting:
38 The Management Accountant l August 2016
The initiatives required to improve the quality of management
included introduction of double entry accounting and systemic
book-keeping that can help in reporting true and fair financial.
The accounting function within the StCBs and DCCBs is
expected to be strengthened with the implementation of core
banking solution (CBS). The National Bank for Agriculture and
Rural Development (NABARD) supported the PACS by providing
“Common Accounting System (CAS)” that was exclusively
designed to meet the accounting and MIS needs of PACS.
NABARD also supported the PACS on the implementation of CAS
with necessary capacity building.
Capacity Building:
The participants in the capacity building programmes on
accounting usually included the Chairman/President, Vice
Chairman/Vice President and Directors on the Boards of the
PACS, the Secretary/CEO of the PACS, Assistant Secretary in
addition to those associated with the accounting function of the
PACS as well as those associated with auditing and supervision of
PACS. Such capacity building programmes covering most of these
actors were held extensively in many States with the support of
NABARD, training institutions and other stakeholders of STCCS.
Awareness about Accounting:
The function of accounting is well beyond the transaction
recording, preparation of periodical financial statements
and auditing. The actors associated with the governance,
management, operations and oversight of PACS shall appreciate
the need for or objective of accounting, process of compilation of
financial statements and their use, periodicity of compilation of
financial statements, significance of auditing and review of audit
report to strengthen the PACS and such other aspects.
Inputs from Accounts for BDP: Capacity building is necessary
on how the data/information available or generated through the
financial statements along with other statistical data/information
can be used in the development of Business Development Plans
(BDP) of PACS, or even Strategic Plans, if PACS so desire and their
implementation. The BDP process requires preparing business
development plans based on the potential for business and
taking into consideration historical performance of a PACS. Hence
historical financial statements and statistical data are essential
for the preparation of BDP. The BDP process expects focus on:
k Assessment of local economy so that the product/
service offering by PACS can be aligned to the needs of
all sections of people in the operational area of PACS, so
that the PACS business grows directly and also through
increase in active membership.
k Increasing the loaning, savings and other feasible
financial and non-financial businesses of the PACS.
k Profit planning: improving the profitability including on
how to contain the losses or loss making attributes of
activities undertaken by the PACS.
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 k Improvements to business and operational processes
and thereby achieve higher member/customer
satisfaction.
Business Model and Accounting: The finance and accounting,
even though a support function, is an enabler for any entity to
pursue its the business model. The business model of a PACS with
need based business development and institutional development
initiatives can be summarised as under:
The actors associated with the governance, management
and operations of the PACS better understand and appreciate
the finance and accounting function within the overall business
model of the PACS. BDP prepared with relevant business model
helps in the improvement of business through existing products/
services as well as with the introduction of new products/
services. Accounting helps in reporting improvement of financial
health and performance of the PACS and by presenting the
same with a true and fair view through the financial statements
compiled periodically.
Profit Planning: The profitability of the financial services
business of a PACS, in addition to the scale of the business, is
significantly influenced by the following:
k Interest earnings (accrued/realised) on the loan and
advances by the PACS.
k Interest earnings (accrued/realised) on the deposits
with the DCCB (StCB in the case of a two tier system)
k Interest expenditure (paid/payable) on the loans from
DCCB
k Interest expenditure (paid/payable) on the savings
deposits of the members/others.
k Provision to be made under applicable IRAC guidelines/
NPA provisioning
Salaries, administration and other expenses are usually not
that high. Thrust on understanding and ensuring accuracy in the
above helps in reporting the profit or loss for a particular period
out of financial services business in a fair manner. This is more
on the principle of ‘Management by Exception’; however without
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any exception, the generally accepted and applicable accounting
principles have to be complied with, in any case, with reference to
the overall accounting function. The focus on the above certainly
helps in managing the financial performance of the PACS. Profit
or loss out of non-financial services business usually depends on
trading margins and related costs.
Suggested Approach:
The capacity building programmes shall emphasise on the above
and enhance the awareness of the Boards of Directors, Secretary
and others so that the PACS can march towards profiteering and
be able to contain losses or loss making character of the activities
undertaken.
The design and delivery of the capacity building programmes
can be for homogeneous groups or heterogeneous groups.
Preparation of financial statements can be better presented to
participants associated with accounting activity. But programme
on financial statements analysis can be very effective when
presented to group consisting of President, Vice President,
Directors, Secretary and others associated with accounting as
well as auditors, inspectors, supervisors and representatives of
DCCB and Department of Cooperation.
TNA:
It is desirable to undertake a training needs assessment (TNA)
for a set of PACS within the operational area of a DCCB branch or
a DCCB and then design the capacity building programmes. The
design may include certain standard and common modules and
some as per the specific needs of one or more PACS. Illustrative
exercises based on the needs of participants in a programme can
add value and enhance the absorption of contents presented and
discussed. For example the process of extracting a trial balance
is better illustrated if the participants are not from commerce
background and not familiar with the process. Similarly ratio
analysis and interpretation can also be effective when illustrated
based on the Audit Report of the participant’s PACS in a
heterogeneous group.
Essentials as Examples:
k Based on the needs of specific category of the
representatives of PACS, as referred to earlier, they shall
also be provided with insights on:
k Need for ensuring upto-date transaction recording and
book-keeping
k Need for ensuring upto-date Bank Reconciliation
k Need for ensuring upto-date reconciliation of balances
outstanding.
k Need for ensuring confirmation of balances with all
external entities, atleast once a year (preferably at the
end of the financial year)
k Compilation of periodic MIS for use at various levels
and interested organisations including DCCB, StCB,
Department of Cooperation and others.
August 2016 l The Management Accountant 39
COVER STORY
k Working on and making use of Financial Statements
Analysis including ratio analysis
k Need for financial statements and their analysis, as at
the end of previous month, to be submitted to the Board
of Directors in the monthly meeting.
k Need for compilation and auditing of Annual Report and
conduct of Annual General Body Meeting within three
months of the end of financial year, notwithstanding
the traditional practices, subject to compliance with
applicable legal/regulatory requirements.
k Understanding the Audit Report and comments/
observations of the Auditor.
k Need for submitting “Action Taken Report” to the
Supervisor, Inspector and Auditor, respectively, on their
reports.
Financial Statements and their Analysis:
With reference to the variety of Financial Statements that
are compiled periodically, the capacity building programmes can
begin with simple probing questions like:
k What are the Financial Statements?
k Who are interested in the Financial Statements? Who
are the users of the Financial Statements?
k Why do we need Financial Statements?
k When the Financial Statements are or can be analysed?
k How can we put in place the Financial Statements
Analysis?
k How can we assess the impact of any transaction on the
performance of the PACS even before the transaction
was to take place and while signing/authorizing any
voucher or document?
k How to prepare and analyse a Trial Balance?
k What are Groupings and Schedules?
k How to analyse Trading Account? How to ascertain
business activity-wise profit/loss? How to allocate or
apportion common costs/expenditure?
k How to analyse the Profit and Loss Account? How to
ascertain product or service-wise profit or loss? How
to allocate or apportion common costs/expenditure?
k How to analyse Balance Sheet? How to read and
understand the quality/type of assets or liabilities?
Why is it important to understand options on sources
of fund raising and their application/use?
k What is a Funds Flow Statement, what are its
advantages, how to prepare and use the same?
k What is a Cash Flow Statement, what are its advantages,
how to prepare and use the same?
Expected Outcome:
Such capacity building measures can help in compiling financial
40 The Management Accountant l August 2016
statements on time and periodically; compiling statements to
present the true and fair financials; review and understand the
statements so as to be able to take appropriate decisions in the
interest of PACS and its member-owners; enhancing the end-use
of the statements for efficient governance, management and
operations of the PACS. In addition to these the data/information
on the PACS can be derived from the financial statements or books
of accounts including for the submission monthly performance
reports.
On the strengths of such capacity building, the availability of
periodic financial statements and other data/information helps
in the planning, plan implementation and overall management of
the PACS better so that their performance improves. The PACS, on
such strengths, can also be positioned to service their member-
customers better. The improved financial health and performance
of the PACS might also help in rewarding their member-owners
with higher returns including dividend payments.
Above all the transparency in reporting the financial health
improves, ability to mobilise additional resources will improve
and thereby new business opportunities or horizons may begin to
open for PACS for their business and institutional development.
Conclusion
Stronger PACS strengthen the overall STCCS at all levels and
stronger STCCS can meet the needs of rural population, those
engaged in farm and non-farm activities and can help in the
sustainability and viability of agriculture as well as in transforming
the rural economy. As Royal Commission on Agriculture meant,
the stronger and sustainable cooperatives sustain the ‘hope’ for
rural India. MA
FootNote
1
http://nafscob.org/pacs_f.htm (as extracted on 30th June 2016)
2
http://www.indiapost.gov.in/our_network.aspx (as extracted on 30th
June 2016)
3
Current Issues in Agricultural Credit, RBI, Vol. 28 No. 1, Summer 2007
4
Expert Committee to Examine on Three Tier STCCS (Constituted by RBI,
Chairman Dr. Prakash Bakshi, 2013)
5
ibid
6
ibid
7
https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/SRRCDS250314.pdf
(as extracted on 30th June 2016)
8
Objectives: ‘Package for Revival of Short Term Cooperative Credit
Structure’, Government of India.
ageekay@gmail.com
www.icmai.in
 COVER STOR
CAPACITY
CAPACITY DEVELOPMENT
DEVELOPMENT
IN
IN
EDUCATION
EDUCATION SECTOR
SECTOR
-an overview of meritocratic countries

“I never teach my pupils, I only provide the conditions in

which they can learn.”
- Albert Einstein

“Padhega India tabhi to badhega India”, well said! We must

have heard this line somewhere but what is the position of
education in our country, what are the measures taken by
government, and society as a whole to make this dream fruitful,
and what improvements can be done in education sector to
strengthen the stem of education in our country? Capacity
building is one of the best measures for empowering education
CMA Kalyani Karna system. Now, the question arises, what is capacity building and
Practicing Cost Accountant how it will work? Let us have a brief insight of building capacity
Delhi in education sector and an overview of meritocratic countries.

www.icmai.in August 2016 l The Management Accountant 41

COVER STORY

Comparative statement of education system in India recommended by Education Commission 1964-66. The pattern of
with top performing countries education in India can be briefly described as follows:
According to Legatum Prosperity Index 2015, India ranks 92
among 142 countries in the field of education. Legatum prosperity
index is a holistic approach to measure the prosperity of the
country on basis of subjective and objective data. This index
covers the metrics like health, education, personal freedom, social
capital, opportunity, and others. Australia is ranked at number
one in the field of education as per Legatum Prosperity Index
2015.

Ranking Country
1 Australia
2 Canada
3 Denmark
4 Netherlands
5 Norway
92 India
Figure 2.1: Pattern of education system in India
Regulatory framework for education in India:
National Council of Educational Research and Training (NCERT)
is the apex body for controlling school education. The regulatory
framework of education is India constitutes three levels, policy
formulation, regulation, and accreditation.

(Source: Data of Legatum Institute)

Figure 1.1: Ranking of countries in the field of education as per

Legatum Prosperity Index 2015

However, South Korea stands first for best education system

followed by Japan, Singapore, and Hong Kong in 2015. The
literacy rate of India is 71% while the overall literacy rate of South
Korea is 97.9%. Let us have a glance of comparative statement
of India and other top five countries with best education system (Source: India Brand Equity Foundation)
in the world.
Figure 2.2: Regulatory framework of education system in India

Country Literacy rate Estimated budget India has one of the largest education networks in the world.
(Adult above (2014) (in billion of The number of institutions in India seemed to be like this
age 15 years, US$)) in 2013-14.
both sexes)
1 South Korea 100% (nearly) $11.3 Number of institutions in India by type (2013-14):

2 Japan 99% $53.152 Schools 14,25,564

3 Singapore 96.84% $11.486 Universities 712

4 Hong Kong 94.6% $63.8
Colleges 36,671
India 72.13% $9.1275
(Source: UNESCO and MBC Times) Stand alone institutions 11,445
Figure 1.2: Comparative statement of countries with best
education system (Source: Ministry of human resource development)
Figure 2.3: Number of schools & institutions in India
Glimpse of Education system in India The market size of education sector is worth US$100 billion out
India follows 10+2+3 pattern of education system which was of which the higher education contributes 59.7 per cent of the

42 The Management Accountant l August 2016 www.icmai.in

market size. 38.1 per cent is contributed by school education, and l Better working environment for teachers.
pre-school segment contributes 1.6 per cent, whereas technology l Development of e-teachers: E-teacher refers to a system
and multi-media contributes the remaining 0.6 per cent. (Source: where a pool of videos of good teachers is created so that
IBEF). Public expenditure on education during the previous years: it can be used by teachers for their improvement.
Year Expenditure Expenditure as % of GDP l ‘Video Teacher Observation’: The teachers should record
(Rs. In crore) their sessions on every fortnight or on regular interval
and it can be used as a reference for students and even
2010-11 297311.17 4.05 self improvement for the teacher.
l Training of teachers
2011-12 356861.42 4.18
l Subject workshops: Subjects workshops on different
2012-13 410027.98 4.29 subjects’ help teachers understand the learning objectives
Sounistry of human resource development) of specific subjects and motivate them.
l Research-based knowledge: Leaders and teachers should
Figure 2.4: Expenditure on education sector by Government update their skills through research-based knowledge
of India and also by sharing experiences with others in similar
positions.
Capacity Building: Definition And Background In Singapore, Leaders in Education Programme (LEP) is
Capacity building strives for the development of skills and organised which is a six-month full-time program. This programme
efficiencies at different targeted levels to achieve the defined focuses on technical administration skills and other elements of
goal. The different levels for capacity building in education sector leadership. The principals hold their posts for 5-8 years, after
can be identified as follows: which they are either promoted, transferred to another school,
or rotated to the Ministry to work on policy formulation. During
2006 and 2007, 22 educational systems in 19 countries took part
in an OECD activity to evaluate the state of school leadership
and investigate different countries’ approaches to enhancing the
quality and sustainability of school leadership.

Institutional level
Policy makers need to address constraints limiting the capacity
of school leaders to engage in meaningful teacher evaluation
activities, including providing appropriate training.

Figure: 3.1: Levels of capacity building process in education
sector
Now, the question arises how to build capacity at different
levels in education sector. Let us discuss the capacity building
approaches at different levels.
Individual level
Capacity development at individual level can be built with the
collective effort of principal, teachers, parents, and students.
The capacity development can be achieved at individual level by
focussing on three questions:
1. What are their responsibilities?
2. To whom should they be accountable?
3. What are the available resources?
Capacity can be developed at individual level with the help of
the following:
l Focus on each student achievement.
Special educator for children with learning disabilities:
The Central Board of Secondary Education (CBSE) has
mandated the appointment of a special educator for children
with learning disabilities for their improvement and to cope up
with others.
Teacher Effectiveness Enhancement Programme (TEEP):
TEEP is a programme developed for the improvement of efficiency
of teachers. It helps to understand the teachers their strengths
and weaknesses.
According to the Annual Survey of Education Report (ASER)
2013, most of the children in rural are not able to read and write.
It can be addressed with greater emphasis on capacity building
of teachers and other staff in these schools.
System level
School Development and Management Committees
(SDMCs):
School Development and Management Committees are

www.icmai.in August 2016 l The Management Accountant 43

COVER STORY

supposed to take part in monitoring and evaluation of teaching Country Primary Lower Upper Higher
methods, facilitating social audits, helpful in upgrading (I-V) secondary secondary
(VI-VIII) (IX-XII)
infrastructure. The National Centre for School Leadership (NCSL)
NUEPA has been transforming ordinary schools into schools of India 41 34 32 24
excellence. USA 14 15 15 14
Administration of school:
Germany 12 12 15 7
The classroom of schools should be well equipped with
technology. The infrastructure should be made more functional. (Source: Ministry of Human Resource and Development)
The teacher pupil ratio is an important area to be focussed. Lower Figure 3.2: Pupil teacher ratio of India and other countries
pupil teacher ratio will enable the teachers to dedicate more time Societal level:
on students. Pupil teacher ratio of our country has the following Moreover, the capacity development can be achieved with
pattern: the collective effort of society as a whole. Meritocratic countries
have uniform pattern of curriculum, and text books all over the
Upper Senior
Primary
primary
Secondary
secondary
Higher country.

2010-11 43 33 30 34 26 Education System of Meritocratic Countries

Why South Korea and Japan lead in education sector?
2011-12 41 34 32 33 24 South Korea has a prominent example of development in
education sector. 78% of Koreans were illiterate till Korean War
2012-
30 30 30 40 23 1950. Afterwards, South Korea committed to educate every child.
13(P)
Now, Korean kids study more than other kids in any other country
International comparison of pupil teacher ratio (year 2011-12) in the world. The reformation of school education system of
Japan started after World War II.

Capacity development in education sector of South Korea and Japan

South Korea Japan

• Korean Ministry of Education attempts to ensure the • The Ministry of Education maintains a uniform lev-
equality of all schools. el of education with close supervision on curricu-
lum, textbooks, and classes.
• Government has made several changes to close the
gap between kids in high-achieving urban schools • Schools in remote and isolated areas have been
and lower-achieving rural schools. provided with special financial treatment for im-
• More schools are opened in rural areas. proving and upgrading their difficult conditions.

• Government offers financial support to all middle
On the part of school students, subsidized computers, and free
Government meals.
• Text books are digitalized to make it easily accessible.
• Cyber Home Learning System has been developed
by Ministry of education. It is an online program de-
signed to help kids after their school learning.
• In South Korea, the Ministry is responsible for hiring
school teachers.
• School curriculum, equipment, teacher qualifica-
tions and salaries, and public expenditures per stu-
dents are almost the same throughout the country.
• The education system of Japan follows the pattern
of 6-3-3-4 (6 years of elementary school, 3 years of
junior high school, 3 years of senior high school and
4 years of university).

44 The Management Accountant l August 2016 www.icmai.in

 South Korea
• The education system in South Korea is test-driven.
• There is a massive pressure of clearing entrance exam
on students to get admission in high school and col-
lege.
• The pressure to succeed on this test starts when kids
are three or four-years-old.
On the part of school
administration • Their school starts from nine a.m. and continues to
five p.m. After the schools children go to Hagwons
(private schools for extra class) from five p.m. until
ten at night. However, sending the kids to Hagwons
is not compulsory.
• South Korean schools conduct a lot of tests.
• Teachers play a prime role in the success of students.
South Korean teachers go above and beyond.
• South Korean teachers work very hard and are dedi-
cated to their jobs.
On the part of teachers • The society rewards them for it and they enjoy high
social status.
• They are paid very well and have great job security.
• Parents of South Korea are more conscious about
the studies of their kids. They spend more on ed-
ucation. 15%-25% of their income is shred off on
education, tutoring and supplementary education-
al materials.
On the part of parents • Most of the parents send their kids to Hagwons
(extra private school) after their regular school day.
• They augment positive relation and healthy com-
munication with their kids and keep an eye on the
school activities of their kids.
• Children spend more time in school and even stay af-
ter school hours for extra-curricular activities.
• They have lot of home works to do at home.
On the part of students
• The students are disciplined and respect their teach-
ers.
www.icmai.in August 2016
Japan
• The curriculum of Japan is world famous. Young
Japanese generally know more about another
country’s history, economy and geography than the
students in that country know. 
• Lot of emphasis is given to master the concept un-
derlying the disciplines.  They want the students to
understand why something works the way it does.
• The emphasis is given to find out the root cause in-
stead of simply following the procedures.
• Students in Japanese schools do not skip grades
nor are they held back.
• Their text books are published in simple manner.
• School buildings are constructed in functional way.
• Teaching has been a demanding occupation in Ja-
pan and teachers are highest paid civil servants in
Japan. 
• Japanese teachers are expected to undergo one
year training programme under the supervision of
leading teachers.
• Japanese parents are more concerned about the
studies of kids.
• The parents are more involved in the studies of
their kids.
• They develop healthy relation with their kids and
motivate them.
• Parents send their kids to private coaching also to
supplement their studies.
• The students spend more time in school.
• Japanese students take the meals from the kitch-
ens and serve them to their classmates in their
classrooms.
• Japanese students are expected to clean both their
classrooms and their hallways.
• Classes are divided into smaller teams for various
activities like cleaning the campus, halls, and yards
of school.
l The Management Accountant 45
COVER STORY
Empowering Education System In India
Government Initiatives under Union Budget 2016-17
and plans:
l To make 10 public and 10 private world class educational
institutions.
l Budgeted expenditure of INR 500 crore for promoting
schedule caste and schedule tribe entrepreneurship.
l To open digital repository for all school leaving certificates
and degrees.
l Budgeted expenditure of INR 1,000 crore for higher school
financing and INR 1,500 crore for skill development
centres.
l To open 62 new Jawahar Navodaya Vidyalayas.
l To cover six crore rural household under rural literacy
program.
l To cover more than one crore youths under Pradhan
Mantri Kaushal Vikas Yojna (PMKVY).
l To open three Indian Institutes of Information Technology
(IIITs), through Public-Private Partnership (PPP) of
Government and private companies like Tata Motors
Limited, Tata Consultancy Services Ltd and Hubtown
Limited.
l “Kaushal Bharat, Kushal Bharat” initiative to train more
than 400 million citizens by 2022 that would enable them
to find jobs.
l National Policy for Skill Development and Entrepreneurship
2015 (first integrated program to develop skill and
promote entrepreneurship).
l Skill Loan Scheme augments to disburse loans of Rs 5,000
to Rs 150,000 to 3.4 million Indians who are planning to
develop their skills in the next five years.
l Memorandum of Understanding between Center for
Research & Industrial Staff Performance (CRISP) and
Government of India to explore national and international
opportunities for strengthening skills development in
India.
l Increase digital literacy to at least 50 per cent of Indians
from currently 15 per cent over a period of next three
years.
l Opening of IIT’s and IIM’s in new locations.
l Promoting online mode of education.
Capacity development with foreign countries:
According to Department of Industrial Policy and Promotion
(DIPP), the FDI inflow was counted as US$ 1,209.40 million from
April 2000 to December 2016. India allows 100% FDI through
automotive route. Several recent remarkable plans have been
undertaken by the government to empower the education system
in India.
46 The Management Accountant l August 2016
l Intel Corporation, US based multinational corporation
has planned to tap US$40 billion to private schools
to equip the students with the knowledge of computer
technologies in collaboration with Extra marks Education.
l EdCast based in Silicon Valley has planned to invest up to
US$ 50 million in India with collaboration of more than
500 educational institutions to provide technology based
education.
l Venture capital fund Acumen has invested in two
Hyderabad-based education start-ups—Ignis Careers
(US$ 250,000) and SEED (US$ 650,000)
l Dell Foundation, has made its first two investments in
education-based startups: Report Bee and Guru-G.
l Agreement between World Bank and Government of
India to line up the credit of US$ 300 million for Madhya
Pradesh Higher Education Quality Improvement Project.
l The Japan International Cooperation Agency (JICA) will
train bureaucrats from the HRD ministry, and experts
from schools boards and primary school teachers in
Mathematics and Science Subjects to enable them to
learn skills to improve the quality of Mathematics and
science education.
l Memorandum of Understanding (MOU) between India
and Australia to boost partnerships between the two
countries in the fields of higher education and research.
l Nai Manzil scheme for education and skill development of
minorities in India will be supported by World Bank with
the loan of US$ 50 million.
Conclusion
School acts as a mirror of the political, social, economic,
religious and cultural aspects of the society. The capacity
development of education system can be achieved in
collaboration with Government, school administration, student,
teachers, and parents. The duty of parents does not wind up with
the admission of their wards in good schools and institutions.
www.icmai.in
Rather, parents should keep an eye on the daily chorus of their patterns to retain things, improving concentration power, and
children at schools and colleges. They should understand and boosting their confidence. The role of teacher is predominant and
encourage their children to achieve their goals. The countries carries lot of weight. Students and youth are the building blocks
with best education system are following the uniform pattern of any country. The development of country depends on how the
of curriculum, classes, and textbooks. The curriculum should be young saplings are nurtured. Hence, the role of education sector
designed in such a way that the theoretical knowledge should is prominent in the development of country. Education sector
be followed up by practical knowledge enhancement. The job of can be empowered with the capacity development at all levels
teachers should be respectable in the society and they should and with the joining hands of school, parents, teachers, students,
be rewarded with job security and well pay off. The teachers of and government. MA
South Korea and Japan go an extra mile for the development
of students. The teaching pattern should be interesting and References
fresh to build the interest of students. The teachers should be 1. www.mhrd.gov.in
highly qualified and educated so as to impart their best to the 2. www.ibef.org
students. Indians have inheritedthe ancient culture of supremac 3. www.weareteachers.com
of teachers. 4. www.ncee.org
“Guru Gobind dou khade, Kaake laagun paanye 5. www.nier.go.jp
Balihaari Guru aapne Gobind deeyo bataaye” 6. www.oecd.org
Henceforth, the teachers should always try to understand the 7. www.data.uis.unesco.org
skills and hidden potentials of children and motivate them. They
should impart the tips and techniques for fast learning, revising cwakalyani@gmail.com

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as it is recognized in most countries. The actuaries attract
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Contact 02267843333/3304 • Email: acet@actuariesindia.org

www.icmai.in August 2016 l The Management Accountant 47

COVER STORY
STUDY ON
SUSTAINED
COMPETITIVE
ADVANTAGE OF

CS Meenu Gupta
Company Secretary, Noida

T
he success of any organization depends on understand the principles of organizational capability and
its capabilities which represent manager’s who are continually able to adapt their practices to those
proficiency in understanding principles and principles will be able to sustain their competitive advantage.
applying processes consistent with principles
for managing people for competitive advantage.
INDUSTRY KEY
To respond to increased competition, SUCCESS FACTORS
COMPETITIVE
managers must learn how to build a sustained Competitive ADVANTAGE STRATEGY
Advantage. It’s an internal analysis of organization which
includes organizational resources and capabilities leading to ORGANIZATIONAL
distinctive competitiveness. The author, through this article, CAPABILITIES

highlights the process of achieving sustained competitive

advantage through researching case of Proctor & Gamble RESOURCES
(largest manufacturer and distributor of consumer products) TANGIBLE INTANGIBLE HUMAN
a and analyzing the role of cost accountants in achieving • Financial TechnologySkills/Know-how
• Physical ReputationCapacity for Communication
competitive advantage. Culture&Collaboration
Motivation

Competitive Advantage Strategy Model

Organisational capability is based on a set of principles, Resources are assets employed in the activities and
not practices, which will be stable over time. Managers who processes of the organization including human, financial,

48 The Management Accountant l August 2016 www.icmai.in

physical, technological and informational. Capabilities are assets
like industry-specific skills, relationships and organizational
knowledge which are largely intangible and invisible assets.
Sustained competitive advantage is when a firm main-
tains above average and superior profitability for all
firms in its industry and profit growth for a number of
years.
Achieving competitive advantage involves responding to critical
questions:
1. To what extend do we understand economic and social
conditions affecting our business?
2. To what extend do we understand and meet customer
needs?
3. To what extend does my business have world class
performance in each source of uniqueness and have the
ability to integrate across four sources of uniqueness?
4. To what extend do we have a shared mindset inside and
outside the organization?
5. To what extend do we use all human resource practices to
build shared mindset?
6. To what extend do we have the capacity for change?
7. To what extend do we have leadership throughout the
organization?
Building Blocks of Competitive Advantage
www.icmai.in
Greater Efficiency is achieved through productivity thereby
leading to lower costs. Quality products are reliable and lead
to differentiation by attributes with perceived higher value.
Product innovation increases company’s pricing options, lowers
the production cost and creates uniqueness. Identifying and
satisfying customers’ needs better than competitors do, ie.
Customer response time, design, after-sale service and support,
all lead to brand loyalty and premium pricing.
Analysing Competitive Advantage & Profitability
Determining costs of performing specific value chain activities
and measuring how company compare cost with those of rivals
and reducing the cost ensures competitive advantage. Costs of
key value chain activities includes purchase of materials, payment
of suppliers, management of inventories, getting new products
to market, performance of quality control, filling and shipping
of customer orders, training of employees, and processing of
payrolls.
Studying The Competitive Advantage Achieved By
Proctor & Gamble (P&G)
Procter and Gamble (henceforth P & G) is one of the largest
manufacturers and distributors of consumer products in the world
with a global reach for it 300+ brands of 180 countries having
brands as diverse as disposable nappies, snacks, juice drinks,
shampoos, laundry detergents and feminine protection products.
During 1990’s the company made some significant alterations to
its corporate strategy; it aimed to reduce its cost structure and
develop its differentiated business-level strategy, in an attempt
to increase revenues and profits. The rapid development of
international markets and globalisation demanded a corporate
“shake up”. Moreover, the reduction of trade barriers and
tariffs indicated that to retain a competitive advantage globally,
company had to develop an effective International strategy, whilst
benefitting from economies of scale.  Cross-functional integration
and speed of innovation increasingly became imperative to
corporate strategy.
The cohesion between the strategy and structure of the
company is crucial. The structure will align the company with the
strategy it wishes to pursue; and, along with the company’s culture
and control systems, will utilise the value-chain competencies and
capabilities, and facilitate increased competitiveness, profitability
and superior return on Investment.
Strategies adopted by P&G for achieving competitive
advantage
1. Efficiency:
Worker’s morale is needed for productivity. AG Lafley, President
and CEO of P&G, implemented pay-incentives that tied employees
to performance of the Company.
August 2016 l The Management Accountant 49
COVER STORY
2. Reduction in costs:
l Just-in-Time inventory control system has been
implemented to reduce costs, ie., the calculation of
demand should accurately match supply and so the
supply chain, logistics and distribution channels can be
effectively coordinated to manage increase/decrease in
demand.
l Integration mechanisms have been implemented through
‘direct contact’ with one another. This is a simple, cost-
effective way to communicate problems and ensures that
opinions and concerns are voiced. Moreover, it is essential
to have direct contact between different functions,
especially those that must co-operate considerably.
Conversing directly between one another ensures
cohesion of products and market, with overall strategy.
3. Human Capability:
P&G’s human resource department has the responsibility for
development and growth of people towards higher levels of skill,
competency, creativity and fulfillment, in a way that supplements
each individual.
4. Innovation:
Focus is on involving people across the business either to
develop their ideas or become involved in working together to
make ideas happen. At the heart of this culture is the innovative
use of connections, centred upon understanding consumers,
the energy towards innovation, supported by research and
development processes.
Companies must innovate in order to keep ahead of their
competitors. The CEO would like to develop a business in which
‘big ideas attract the capital and talent they need’ and points to
innovate equation:
5. Fostering Teams:
The idea of a new product may spring from the mind of an
individual, but only a collective effort can carry that idea
throughout proto-typing and launch. A broad network of social
interactions is required to integrate innovation with both business
strategy and work processes.
6. Customer Responsiveness:
P&G’s mission extended to include the idea that ‘the consumer
is boss’. Mission will succeed as the consumers are treated as rich
source of information and direction by developing better ways of
learning by listening to them, observing them in their daily lives
50 The Management Accountant l August 2016
and even living with them. It focuses on few big launches and an
innovation that was meaningful to consumers.
7. CMAs Role:
P&G’s delivered on an average 6% organic sales growth since
the beginning of decade, virtually all of it driven by innovation. The
cost accountants reduced research and development spending as
a % of sales; it was about 4.5% in late 1990s and only 2.8% in
2007. In that year, they spent US$2.1 billion on innovation and
received $76.5 billion in revenues.
Role Of Cost Accountants In Achieving Competitive
Advantage
The cost accountants have to take decisions regarding the use
of materials, processes, product designs and have to plan the
costs or expenses to support operating plan for their department
or section.
Organisations increase advertising expenditures to increase
sales, increase research and development expenditure to promote
new products. Here, concerned managers are deliberately
incurred additional costs in a period. Cost and Management
Accountants (CMAs) have to ensure that a cost is incurred with
the expectation of profit.
CMAs provide decision support for managers in each activity of
value chain. Value chain is a visualization of complete business as
a sequence of activities in which usefulness is added to products
or services produced and sold by an organization. Value chain
as a strategic framework for analysis of competitive advantage
was promoted by Michael Portal where managers have to become
familiar with framework and providing information to implement
it.
Conclusion
Building better products or services, pricing goods and services
lower than the competition, or incorporating technological
innovation into research and manufacturing operations must
today be supplemented by organizational capability, i.e., the
firm’s ability to manage people to gain competitive advantage. To
establish organizational capability, companies must innovate to
adapt to changing customer and strategic needs to keep ahead
of its competitors. While taking organization to its success, we
cannot forget the role of cost and management accountants
in achieving cost competitiveness at each stage of value
chain activities like processing raw materials, management of
inventories, training of employees, processing of payroll, etc to
achieve the expected profit. MA
guptameenu90@gmail.com
www.icmai.in
 INTERVIEW
CMA Asim Kumar Basu
Director (Finance)
MSTC Ltd

Q .What have been the major innovative financial steps

taken during your tenure with this organization to gain
more competitive edge?
e-Commerce in Mineral products in bringing more revenue to
your organization?

A MSTC being a trading and e-Commerce company, its major

expenditure are of administrative and committed nature.
Hence in order to provide services at the competitive rate always
a watch has to be kept on containing the overhead to operating
income ratio. While taking any decision we always ensure that
administrative expenses do not increase unnecessarily. We
also give emphasis on training of manpower to increase their
productivity. This is evident from the fact that MSTC which
handled a business volume of Rs.14100 Crores with a manpower
of 310 nos. in 2010-11 has handled a business volume of Rs. 30538
Crores with a manpower of nos.324 in 20115-16. Apart from this I
have given emphasis on better treasury management to increase
interest income and reduce interest expenses on short-term
A Forest produce which are not perishable and have more
demand can be sold through simple forward auction as
competition can be generated. For products where supply is more
than demand Principal/Seller has to be convinced that as supply is
more than the demand their products may be booked at the floor
price only. In case of Kerala Forest Department floor/start price is
declared and the bidders have to bid over the disclosed price. Our
Bangalore office  has signed agreement with Karnataka Cashew
Development Corporation(KCDC) for sale of cashew plantation.
In this case bidding is to be done at the flowering stage.
Q What are the major challenges for sale of Agro
Products?

borrowings for our trade segment. All these have contributed to

improve and maintain the bottom line in spite of competition in
the market and falling commodity prices.
A Main challenges for sale of Agro Products are: presence of
middle man, Illeteracy and poverty of the farmers making
them vulnerable to exploitation at all levels by all concerned,
farmers’ inaccessibility to information of market or technology

Q How has been the initiative in e-Commerce in

Agricultural and Forest  products different from
and pressure from middle men to sell under distress at throw
away prices. As a result, prices at which they are forced to sell

www.icmai.in August 2016 l The Management Accountant 51

INTERVIEW
is much lower than the rate at which consumers buy form the
market. For example, Pomegranates are sold for Rs 120 to 150
per kg in the market, whereas farmers  have sold for Rs 20 to 30
per kg. This amount is not sufficient for them to meet their daily
expenses forget about repayment of debAnother important issue
is the logistics. Even if we can arrange for auctions on behalf of
small group of farmers logistics has to be strong so that material
is delivered in the shortest possible time considering perishable
natures of the product.
Q MSTC is going to set up Auto-Shredding Plant for
supply of shredded Scrap to various steel industries.
How will this sort of strategy shape more revenue to in your
organisation?
A At present MSTC is in service sector – trading
and e-Commerce. MST has planned its foray in
manufacturing with setting up first Auto-Shredding Plant in
india for manufacturing shredded scrap with use of end of life
vehicles(ELVs) as its feedstock. This will bring a major change in
scrap industry and help in saving precious foreign exchange spent
onf import of shredded scrap and also save natural resources like
coal and iron ore used in normal process of steel making. Apart
from earning revenue, MSTC plans to do it in national interest and
save the precious metals which is otherwise wasted in the manual
method of scrap recovery. However, it will not add any revenue
directly to MSTC since we are planning to set up the unit under
JV with a private company Mahindra Intertrade Ltd. ( a part of
Mahindra Partners).
Q Who are your strong competitors in e-commerce
segment of business? What are the major opportunities
and threats of this sector in India?
A We are providing e-Commerce service in B2B and our
competitors are mainly Mjunction, ABC Procure, C1 India,
Matex and Nexttender. However , we are providing services along
with Mjunction in e-auction of Coal for Coal India and SCCL.
With the Govt. of india emphasising on transparency in Govt.
transactions and public procurement, there is a tremendous scope
in coming years particularly in e-procurement. Since MSTC has
created strong credentials in providing hassle free and transparent
e-Commerce services to the Govt. departments and the PSUs,
MSTC is quite hopeful to garner a good amount of business
in e-Procurement in coming days. We are already providing
e-procurement services to NHPC, Andrew Yule, MOIL, NTPL, KoPT
and other organizations. We have also signed agreement with RBI
and Bank of Baroda very recently. We have developed a separate
portal for Power Ministry in the name of Deen Dayal Updadhyay
Gram Jyoti Yojna (DDUGJY) for procurement of certain major
equipments/materials centrally for various users and already
52 The Management Accountant l August 2016
there have been transactions worth more than Rs.5000 crores.
We expect to get more business only by proving our credentials
and based on our performance record. For this we are regularly
updating of portal and getting it periodically certified by STQC, an
arm of Dept. of IT, Govt. of India. What is more important is that,
being a PSU, our portal complies with all the requirements of CVC,
Dept. of IT and GFR. Other e-procurement portals lack these. No
doubt we have a competitive edge over others on this account.
But there are a number of small players in e-Commerce segment
who do not have porven track record and who do not comply with
all the requirements of public procurement, But they get business
from PSUs and the Govt. by influencing or by offering very low
rates of service charge.
Q Ten years down the line what sort of growth do you see
in this sector?
A There is a scope for phenomenal growth over coming ten
years both in B2B and B2C particularly in the private sector
where it is not mandated as on date like those in the Govt. and the
PSUs to use electronic platform in sale and purchase transactions.
In PSUs and Govt. also there is expected to be huge growth in
e-procurement. Since our e-procurement is more user friendly and
secured complying all the statutory requirements, we expect to
garner quite a large volume of business to handle which we have
already started planning and training our manpower. We are also
planning to a major play in B2C in metal market in coming months.
Q What are the major strategies undertaken by your
company to bring cost competitiveness ?
A Majority of expenditure are on employees and other
administrative expenses which are of fixed nature. We
always try to keep our expenditure under control and try to handle
more business without increasing unnecessary expenditure of
fixed and committed nature. That is why although our volume
of business has increased by 117% over last five years, our
administrative expenses have gone up by only 50%. This has
helped us to a great extent to make profit in a market of falling
commodity prices.
Q Cost Management and Waste Management are the
buzzwords in the modern business. Please suggest in
what ways Cost and Management Accountants may offer
their expertise more effectively in this quest?
A Since we are in IT related services where product wise /
service wise costing is not possible, there is no scope as
such for cost management. However, there is a scope for judicious
overhead management in line with the growth of business volume
and service income. What is our major strength is the widest reach
www.icmai.in
amongst our clients with a lean manpower of around 320.

Q What policy framework and initiatives would you

expect from the Government to boost up e-Commerce?

A Govt. should make it mandatory to use e-Commerce

beyond a threshold value of purchase and sale transactions
initially in the Govt. and PSUs and thereafter in the private sector.
It should also come out with certain standards/parameters to
judge the quality of services rendered by the e-Commerce service
providers in different segments. If required, there should be a
regulatory body to monitor this. Unless this is done, transparency
and fairness cannot be ensured in an e-commerce transaction
whether it is for purchase or for sale.

Q Would you like to give any message to those aspirants

who want to be a part of your organization?

A There is a tremendous scope for making a career in

e-Commerce field today. My message is for making a
successful career they should try to know the basics of e-Commerce
transactions with its variants, interact with the clients/principals
to understand what really want and their constraints and how to
meet/tackle them to their maximum satisfaction, be it in terms of
higher realization (for sale) and lower cost ( for procurement), and
then actively participate and interact in designing/customizing
the portal. If there is a wide gap between understanding of client’s
requirements and bidders’ expectations and what are provided in
the system/portal, e-Commerce transaction cannot succeed and
achieve the desired objective. For this, they are required to work
as a team, whether they belong to system, operation or finance.
They are to keep in mind they are not manufacturing a product but
giving a particular service which is very much client and customer
sensitive.

Q As an esteemed member of this Institute what do you

feel ICAI-CMA should do to initiate associations and
tie-ups towards effective Industry-Institute interface?

A Yes, there is a necessity for this. Unless there is a regular

interface between the two, the requirements/expectations
of the industry from the cost and management accountants
cannot be known. These requirements are regularly changing
under today’s fast changing business scenario. If there is a regular
interface between the two, this can help in properly designing and
timely updating the course curriculum of the Institute and also
arranging proper training for the passed out cost and management
accountants so that they can contribute effectively wherever they
are working and meet the aspirations of the management.

www.icmai.in August 2016 l The Management Accountant 53

INTERNATIONAL CORNER

Many Implications of Leaving an

Economic Union

Dr. Saibal Kar

Professor Department of Economics, Calcutta
University and IZA, Bonn

54 The Management Accountant l August 2016 www.icmai.in

T
he term BREXIT is right now known to all the
esteemed readers. Great Britain, rather England,
wanted to exit the European Union and went
into a referendum on June 23, 2016 to make a
country-wide decision about what it should be.
It was not a special day as it began, but ended
as one, certainly. It is the first time in the history of Economic
and Currency Unions, popularly called ECUs that one or more
www.icmai.in
countries opted out of the treaty. There has not been another
occasion before, where a member country actually declared that
it shall no longer bear the burden thrust onto the whole group.
In this case, the English made it clear that they wish to close
down borders to the millions of migrants that arrived in Europe
in a very short span of time. It was a major one, but there were
many other causes also. The economic unions first and foremost
mandate is that all the members stay together and withstand
August 2016 l The Management Accountant 55
I N T E R N AT I O N A L C O R N E R
adversity and enjoy success as a community. We will talk about
the various nuances of economic and currency unions shortly. But
before that, allow me to refer to another issue, which according to
many is central to how policy decisions are adopted in democratic
countries. First of all, general elections or referendums on special
issues are both determined by majority ruling - whichever side
gets more votes wins. An important tenet of voting behavior in
democracies, as the Greek and Roman scholars and legendary
personalities contemplated quite early on, is the education
of the voter and spread of information on matters central to
choice of representatives or critical issues. Now, most developed
democracies continue to enjoy these attributes owing to their
conscious effort to instill quality education as well as to record
and disseminate information much more freely. Both of these
activities cost the exchequer and therefore might pose constraints
for not so affluent countries. Importantly, the level of economic
development both determines as well as gets determined by
country-wide education and information flow. Restricting flow of
information often amounts to sub-optimal allocation of public
resources, bank credits, incentives for investment, etc. These
affect economic growth, in turn. Conversely, better dissemination
of information allows individuals, firms and even the government
to make appropriate judgments about socio-economic policies.
These conditions, it seems, hold strong mostly for all the countries
in the Organization for Cooperation and Development (OECD).
Surprisingly, with regard to BREXIT, on June 23, it left some
ambiguity regarding how deep the knowledge and information of
the voters have been all these years on the subject of economic
unions. This comment is based on the reports made in serious
media outlets that after the referendum was ‘over’ millions in
England searched for the ‘meaning’ of the word ‘European Union’
through various search engines. Were they not aware of what
it implies? The referendum, however, had been made by then.
Later, many people, including some of the notable economists
from University of Chicago, where Nobel Laureate Prof. Robert
Mundell, of the most prominent proponents of EU, had also
worked between 1965 and 1971 (when the European Monetary
Union was being considered seriously, before ultimately coming
into existence in November 1993) stated that this was indeed
a strange outcome in view of all the words spent thus far on
rationality of choices. It may be useful to devote a few words on
economic unions at this point.
Over the last two decades there has been an unprecedented
proliferation of regional trading arrangements (RTA) and free trade
agreements between countries both within and across continents.
Bilateral and regional trade agreements had existed even before
the World War I period, the most notable of which were the
commercial treaty between England and Portugal in 1703 and the
Anglo-French treaty in the 1860. The post World War II period
also saw evolution of the European Union, which was motivated
56 The Management Accountant l August 2016
in part by the argument that economic cooperation can mitigate
conflicts between them and that economic strength is the basis
of political and military power. The formation of European Coal
and Steel Community (ECSC) in 1951 and thereafter European
Economic Community (EEC) in 1957 that marked the beginning
of today’s European Union were also motivated by the success
of BENELUX customs union formed in 1948 between Belgium,
The Netherlands and Luxembourg, which later developed into an
economic union after the 1958 BENELUX Treaty. In Asia, there
was the Association of South East Asian Nations (ASEAN), which
came into force in the late 1960s with Indonesia, Malaysia, the
Philippines, Singapore and Thailand as the five founder member
countries. There was also the Gulf Cooperation Council (GCC),
a political and economic union, was formed by Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia, and the United Arab Emirates in 1981.
Caribbean Community and Common Market (CARICOM) and the
South African Customs Union (SACU) also evolved during the
1960s and 1970s in other parts of the globe.
But these developments of economic and political cooperation
amongst a group of countries had been far outstripped by
phenomenal proliferation of new bilateral and regional trading
arrangements and trade blocs during the 1990s, particularly in
Asia. The number of active RTAs has shot up to 230 by the end
of 2003 and further increased to 290 in 2010 from a mere 50 in
1992. This phenomenon is called the contemporary regionalism,
with features and motivation behind these trade blocs being
distinctly different from those that evolved during 1960s and
1970s, termed as old regionalism.
Unilateral free trade policy is not necessarily an optimal
development strategy for a country. Unilateral tariff reduction
on part of a country makes it better off in terms of efficiency
and resource allocation gains only when its trading partners
reciprocate by similar tariff reductions. But, for large countries,
there are incentives for unilateral imposition of tariffs on each
other’s imports. Thus, reciprocation is not ensured through
unilateral trade liberalization. Even for the smaller countries, the
gain from better allocation of its scarce resources through tariff
reductions remain far from realized if its larger trade partner does
not reciprocate. This is because, with no increase in market access
for its exporters and therefore in the demand for their outputs in
these markets, the resources released from the import competing
sectors of the economy cannot be effectively used. Note that
for smaller countries, who are price takers in the world market,
tariff reductions bring in no changes in the terms of trade. Thus,
in absence of reciprocation, unilateral trade liberalization may
actually result in a decline in the aggregate value of output and
growth of the economy. Here comes the importance of a regional
approach to free trade as it ensures reciprocation on mutual
market access through regional trading arrangements. Note
that the European Union is much bigger than free trade only; it
www.icmai.in
includes several other forms of cooperation, common currency,
one central bank which aligns all other country-specific central
banks in terms of monetary policy regimes and a free border
for mobility of all kinds of workers within the boundaries of the
member countries. The last one seems to be at the source of the
decision that has rocked England already and may have much
deeper impact on every other country of the world.
Once reciprocation is ensured through RTAs, substantial gains
arise for the member countries, both static and dynamic. Jacob
Viner talked about two specific effects of formation of a customs
union and welfare consequences thereof. First is the trade
creation effect resulting in welfare gains for all member countries,
which in a sense reasserts the arguments in favor of gains from
trade. The second effect of forming a regional trade bloc is trade
diversion, which Viner perceived to be bad for the members. This
conclusion was subsequently found to be not a self enforcing
proposition and led to a controversy between Richard Lipsey and
Jagdish Bhagwati over why Jacob Viner thought trade diversion
effect to be bad for member countries of a regional trade bloc.
That trade creation is good can be explained as follows. As
tariffs on trade within a regional trading bloc are abolished, the
volume of intra-bloc trade increases. For a regional trading bloc
amongst countries that are small, such mutual and reciprocated
(or regional) tariff reductions do not affect their respective terms-
of-trade. Hence, all countries experience gain from forming a
regional trading bloc, or to be more precise, a free trade area
(FTA) through its trade creation effect. For a trading bloc amongst
countries that are large, mutual and reciprocated (or regional)
tariff reductions do affect their respective terms-of-trade. Thus,
there may be gains and losses for member countries from
such terms-of-trade changes. The region as a whole, however,
unambiguously gains because of the distortions being eliminated
through abolition of tariffs on intra-bloc imports. Thus, in the
case where at the regional free trade equilibrium some of the
member countries gain and others lose relative to tariff-restricted
regional equilibrium before the formation of the customs union,
there is scope for compensating the losers through side payments
to make the regional trading bloc amongst the large countries
(regionally) Pareto optimal and thus beneficial for all. Note that,
countries may gain individually even if they experience terms of
trade deterioration after the formation of the FTA, provided such
deterioration is small enough so that the consequent welfare loss
is outweighed by welfare gain from increase in intra-FTA volume
of trade.
These characteristics are integral to formation and maintenance
of FTAs and economic unions between countries. However, both
migration and the credible threats from other member countries
in attempting to leave the union might have pushed the patience
of the Brits (not for the Scotts and the Irish, as yet) and they
decided to quit. Thus, after 43 years as members of the European
www.icmai.in August 2016
Union, voters in the United Kingdom have voted to leave.
Immediately following, Britain’s Prime Minister David Cameron
resigned, bringing an abrupt end to his six-year premiership.
These changes will have significant economic, political and social
consequences. “Brexit was the spark in a place full of gasoline,”
says Luigi Zingales, professor of entrepreneurship and finance at
Chicago Booth University School of Business. “The issue is not
only non-performing loans. There is a lack of credibility … of the
Italian banks vis-à-vis the market. You cannot minimise problems
for years and then be believed.”
The Brexit vote will force the next U.K. prime minister to make
a significant choice: Whether to control immigration into the
country, or preserve the pre-eminence of the country’s financial
center, known as the City of London. Doing both appears to be
infeasible. Britain voted for Brexit, but many seek ways to avoid
it. This draws comparison with the events of almost exactly a
year ago when the Greek government ignored the outcome of the
Greek bailout referendum.
The three economics professors who compile the data on
economic uncertainty across the globe — Scott Baker, Nick Bloom
and Steven Davis — have shown that a rise in their Economic
Policy Uncertainty index foreshadows lower investment, output
and employment. Luigi Zingales further states, “What we have
observed in Britain and what we are observing in the U.S. with
Trump is a growing mistrust of voters toward experts. In the Brexit
debate it was hard to find any economist justifying a departure
from the European Union. In fact, many were willing to make
forecasts so pessimistic as to be accused of scaremongering. Not
only did these forecasts fail to rally the vote for Remain, they
probably contributed to the victory of Leave.” On the same note,
Prof. Anil Kashyap warned that one of the biggest consequences
of the British vote to leave Europe is that other countries will
consider doing the same. Populism and nationalism are on the rise
all over the globe. Now that U.K. voters have been given a chance
to express their preferences, I believe that it is almost inevitable
that another government inside the EU will hold some sort of
similar vote. It is surprising that the market analysts in UK did
not consider a short-run impact of BREXIT at all. On the contrary,
however, most economists would agree that, the shorter the time
frame, the more of an effect there is. That’s true in the UK and
in the US. Over the longer run, they will be able to sort out trade
agreements with Europe. They might take a Switzerland model;
they might take a Canadian model and will have time to readjust
the plans afresh. The countries in effect will be able to sort out a
model. It was also echoed in the discussion by operators in the
stock market - the gains and losses are going to be more short-run
in nature and the question is whether a country as a whole shall
succumb to these effects and set in a path of long-run recession.
Overall, the Brexit shock has given the economy “a good kicking”
according to a special set of surveys of businesses taken in the
l The Management Accountant 57
I N T E R N AT I O N A L C O R N E R
wake of the European Union referendum vote, which suggest the
UK economy is now contracting at its steepest pace since the
last recession in early 2009. The “dramatic deterioration” will
significantly increase the odds of a major monetary stimulus from
the Bank of England next month to support the economy.
Markit/CIPS surveys of firms’ purchasing managers conducted
in recent days suggests activity in both the UK’s services and
manufacturing sectors have slipped into contraction in the wake
of the 23 June vote.
The Purchasing Managers Index reading for the services sector
in July was 47.4, well below the 50 mark that signals growth.
The reading for manufacturing was 49.1. Combined, that takes
the “composite” PMI reading for the economy to 47.7, down
from 52.4 previously and its lowest level since April 2009. “The
month of July saw a dramatic deterioration in the economy, with
business activity slumping at the fastest rate since the height of
the global financial crisis in early-2009” said Chris Williamson,
chief economist at Markit. At this level, the survey is signalling
a 0.4 per cent contraction of the economy in the third quarter…
With policymakers waiting to see hard data on the state of the
economy before considering more stimulus, the slump in the PMI
will provide a powerful argument for swift action. Economists have
already slashed their growth forecasts for 2016 and 2017 in the
wake of the Brexit vote, with a majority surveyed by Bloomberg
expecting the UK to return to recession for the first time in seven
years. The readings were worse than City of London traders had
been expecting and the pound instantly sank more than a cent
and a half to $1.3115, in the wake of the release, having been
trading at $1.3280 previously.
The Bank of England held off from cutting interest rates in July
further from their record low of 0.5 per cent, despite comments
from the Governor Mark Carney, in the week after the vote that an
easing of monetary policy was “likely” over the summer. But the
minutes of the July meeting did say that a majority of members
of the nine person Monetary Policy Commitee “expect monetary
policy to be loosened in August”.
It is important to note that for UK, services account for around
80 per cent of the economy and manufacturing 10 per cent.
There is every possibility that with falling interest rates in the
UK, there may be short-term capital flight to countries which still
offer higher interest rates. India may benefit from such capital
58 The Management Accountant l August 2016
inflow. Moreover, this may have a strong domestic impact on
prices, employment, production, services, export and import. In
a nutshell, the impact of Brexit is about to fall in almost every
aspect of life. However, not all may be on the negative necessarily.
For example, a weakening pound-sterling may help the UK based
exporters while making it harder for importers. It should improve
the balance of payments in UK. Question is, does UK have a lot
of manufacturing to export, apart from its financial and other
service sector outputs? The manufacturing PMI reading in the
previous month had been 52.1 and for services it had been 52.3.
The drop in the services reading to 47.4 was the steepest monthly
decline since the PMIs began in 1996. City of London economists
had only been expecting a decline to 49.2.
The bleak PMI results contrast with a report released on
Wednesday by the Bank of England’s regional agents – seen as
the central bank’s “eyes and ears” on the ground – who reported
that the majority of firms they contacted in the wake of the Brexit
vote “did not expect a near-term impact from the referendum
result on their capital spending”. Yet the agents did report that
around one third of firms expected “some negative effects over
the next twelve months, with reports of a ‘risk-off’ approach to
expenditures and some imminent plans for spending slipping”.
What this suggests is quite simple, indeed. The full and pervasive
impact of Brexit is not quite comprehensible as of now, and most
people are taking the impact as they come on a day-by-day
basis. However, the fear of other countries following suit is still
very real. Under the circumstances, weaker southern European
economies may hold the stronger ones like Germany on ransom
for other benefits in order that they do not leave as well. One
thing that most of us are still not discussing out in the open is
what terrorism and religious fundamentalism could do to a whole
lot of countries around the world. If the Syrian crisis and refugee
migration had not reached the shores of Europe in the forms of
millions of human beings, many of these issues could have been
averted for now.
We need another occasion to discuss the entire impact of
migration into Europe and its relation with the larger issues of
stability of an economic union. MA
skar1801@yahoo.com
www.icmai.in
 ECONOM
Fiscal Federalism:
Issues and Pitfalls in Local Self Governance
www.icmai.in August 2016 l The Management Accountant 59
ECONOMY
Samar Ray
IA & AS( Retd )., former Dy.
Comptroller & Auditor General of
India and also former Principal
Secretary, Finance (Internal Audit)
Department, Govt. of West Bengal
D
emocratic decentralization is the development
of reciprocal relationships between central
and local governments and between local
governments and citizens. It addresses the
power to develop and implement policy, the
extension of democratic processes to lower
levels of government, and measures to ensure that democracy
is sustainable. Democratic decentralization incorporates both
decentralization and democratic local governance1. It is more than
two decades since India has embarked on the path of democratic
decentralisation and grassroots democracy. Constitution has
been amended, laws are in place, fund, functions, functionaries
have been devolved and we are happy that the world’s largest
democracy has the vibrancy to institutionalise participatory
system of governance. Eleventh and twelfth Schedules of the
Constitution define the mandate and Central and State Finance
Commissions do the gap analysis periodically and discharge grants
to meet the mandate. But have we achieved the desired level of
efficiency in implementation and delivery? Have the citizen’s
charters been fully honoured? Are the accountability standards
robust and self-sustaining? Moreover, when India can’t boast
of a high status in international corruption index, are the huge
resources flowing to the grassroots well insured against leakages
and wastes? What about recording and upkeep of the assets
created? While there is a general belief that decentralization and
government corruption are closely linked, theories differ in their
predictions of what the net relationship between them should
be. A variety of models have been developed to examine the
political economy of decentralization, leading to very different
implications for the relationship between decentralization and
corruption. Broadly speaking, these models emphasize several
basic factors: (a) inter-jurisdictional competition; (b) monitoring
and direct accountability; (c) dispersion of decision-making
powers; (d) competence and bureaucratic ‘quality’.2
In India, the grassroots democracy involves the Panchyati Raj
Institutions (PRI) and the Urban Local Bodies (ULB). Through a
system of fiscal federalism, a process for devolution of resources
with adequate system of checks and balances and standards of
accountability has been established. In the present discourse we
60 The Management Accountant l August 2016
shall try to flag some of the system frailties which are hampering
the efficacy, efficiency and transparency of the system and the
possible solutions to the ticklish issues. We must remember that
there are three partners involved in delivery: the Union, the States
and the local self governance bodies and main stakeholders are
“We the people of India”.
Budgeting and devolution of funds, grassroots plan-
ning and implementation of schemes.
Budgeting process at the PRI/ULB level often show the
following gaps:
 Non-formulation of annual plan – majority of local bodies
are unable to incorporate estimates of receipts and payments
relating to plans schemes in their budgets.
 Budget proposals not approved by PRIs/gram sabhas
Weak budgeting and budget control
 Loss of assistance due to non-adherence to stipulated
conditions
 Blocking of funds/diversion of scheme funds
 Felt needs not captured in district plans
 Defective selection of beneficiaries
 Lack of utilisation certificates – lack of transparency in
expenditure
State governments are taking cognisance of these shortcomings
and steps are being taken to overcome the deficiencies. We shall
discuss the reforms being undertaken by the states at the end.
Here may take notice of one good budget model developed by
the State of Kerala sometime back. In Kerala, a composite index
of entitlement was evolved taking various components for the
distribution of grants-in-aid (general sector, Special Components
Plan and Tribal Sub Plan) in the following matrix.
Composite Index for Entitlement
Sl. no Indicators Weightage (percentage)
1 Population (excluding SC/ST) 60 (GP) 60 (BP) 50 (DP) 70 (ULB)
2 Tribal population 5 (GP) 5 (BP) 5 (DP) 5 (ULB)
3 Geographical area excluding 5 (GP) 10 (BP) 15 (DP) 5 (ULB)
area under forests
4 Area under paddy 5 (GP) - (BP) - (DP) -(ULB)
5 Own income of Grama Pan- 10 (GP) – (BP) – (DP) –(ULB)
chayata
6 Composite Index of Agricultural 15 (GP) 25 (BP) 20(DP) -(ULB)
labourers, persons in livestock,
fisheries etc. and marginal
workers
7 Composite index of backward- - (GP) - (BP) 10(DP) 20(ULB)
ness: houses without latrine,
electricity etc.
(GP – Grama Panchyata, BP – Block Panchayata, DP – District
Panchayata)
(Source: Kerala Economic Review 2007, State Board, Government
of Kerala)
www.icmai.in
 “My idea of village swaraj is that it is a complete republic, independent of its neighbours for its own
vital wants, and yet interdependent for many others in which dependence is a necessity....Here there
is perfect democracy based upon individual freedom”.
However the fact remains that the states have shown different
degrees of response in meeting the challenges of efficient
devolution of resources and good policy measures are necessary
to strengthen the finances of PRIs/ULBs. Perceived benefits
to be derived from increased decentralisation like improved
service delivery, greater popular involvement in governance and
increased revenue mobilisation still remain matters of concern.
It has been experienced that based on certificates received from
the states it is difficult to provide assurance for utilisation of
funds in real time. States’ apathy occasionally to transfer funds
and functionaries also prove to be an obstacle for PRIs. ULBs
can access the market through issue of Municipal bonds with
state guarantee, but only financially strong ULBs can resort to
the measure and even so the market response may be lukewarm.
Tamil Nadu and Karnataka have achieved some success in pooled
finance model. The most critical factor for obtaining market
finance is an investment grade credit rating for the municipal
bond issues. This will require sustainable revenue base and
appropriate credit enhancement of the issues. Demand and
supply side constraints have to be addressed.3 JNNURM funds
have provided some resource boosting for ULBs.
Accounting Issues, Fund Flow, Asset Management,
Internal Controls
The local body institutions represent the action of the
government at the micro level, thus impacting upon the lives of
the governed and the connections between these institutions
and other local entities. Accounting and accountability play an
important role in the administration and governance of such
organizations and, consequently, in the process of ordering
activities within local communities.4 The accounting scenario in
Indian local bodies, however, has not developed very uniformly
and harmoniously resulting in continuous efforts both at the
union and state to streamline the accounting system right from
developing a proper accounting standard to designing the initial
and subsidiary books of accounts for preparation of correct and
proper (and at the same time, simple) financial statements. I
remember for one particular ULB accounts were not prepared
for 10 years, but when an international bank committed a
soft loan for city development and asked for their accounts, a
presumptive balance sheet with presumptive opening balances
www.icmai.in August 2016
- M.K Gandhi (Harijan 26-7-1942)
were drawn up which was naturally rejected. Necessity being the
mother of invention, state level experts put their heads together
and a balance sheet was drawn up with fifty notes to accounts
disclosing the legacy issues with an action plan for cleaning
the accounts bringing the house to order. In the absence of
accounting rules, Statement 10 of Government Accounting
Standards Board, USA (GASB 10) and Indian GAAP were freely
used for proper disclosure. The deserved international loan was
received. Situation has improved since then. ULBs have switched
over to accrual system of accounting and pulled up the arrears
in accounts. DFID and other international agencies have come
forward for the change management and handholding. A National
Municipal Accounting Rule was developed under the aegis of CAG
of India which the states have either adopted or framed their
own rules. Computerisation of accounts Tally or other software
has also happened. Paying taxes through computer network has
improved collection efficiency and reduced corruption.
In PRIs the situation is on a different footing. Because of
multi-tiered fund flow system and reconciliation with cash based
accounting system of government, certain issues are still being
resolved. CAG has developed a standard format for the three
tiers and some states have adopted it. A standard accounting
software called PRIA was also developed by NIC. There are some
other issues like matching of state and PRIs account codes for
capturing the reflection of destination-wise grants in the PRIs
accounts which are receiving attention. In distribution of grants
also, the variables should be available on a common accounting
platform to measure the distance from the median. Moreover,
absence of uniform and robust accounting system increases the
possibility of corruption, leakages and wastage.
Another issue which troubled the policy makers was transfer
of grants to PRIs for creation of capital assets by the PRIs. These
assets like roads, bridges etc. were created and owned by the
state till the Eleventh Schedule mandated the same to the PRIs.
Under the government accounting rules, grants can be transferred
under the revenue heads. This created a two-pronged issue. First,
transferring under the revenue head will create a huge artificial
revenue deficit for the govt. with a skewed budget and second,
the destination specific grant will get lost in PRI account and it
will never be possible to track the asset. Another window for
malfeasance indeed. Government Accounting Standard Board
l The Management Accountant 61
ECONOMY
(GASAB) is seized of the issue. Fund devolution issue may face
another challenge when disbursement is from society mode to
treasury mode as decided by govt of India. It may introduce a
better track control system and cover fiduciary risks, but the PRIs
will have to gear up their management system.
Audit is another discussed issue. Local fund audit being a
state subject is outside the statutory jurisdiction of CAG. Like
accounting, the states have not sufficient skilled manpower set
to handle the activity efficiently and professionally. Successive
central finance commissions have therefore entrusted CAG to
provide Technical Support and Guidance (TSG) to the local bodies
for accounting and auditing purposes. Some states have made
CAG the statutory auditor under their Acts, with the concurrence
of CAG. Till the process of capacity building is on, this practice
may continue.
Some areas in internal control cause concern. Apart from
weak asset and cash management, inventory control and
stores management suffer from serious deficiencies which have
been brought to the notice of Kelkar Commission (13 CFC).
Reconciliation of receipts and expenditure, bank reconciliation
etc. show serious lapses. Internal audit is also another area which
has been seriously neglected.
Conclusion: Way Forward
To achieve the goals of democratic decentralisation in local
self governance, both the Union and the State governments are
giving stress on capacity building, skill formation, IT literacy and
professionalism at all levels of local bodies. Some initiatives are
internalised, while some are coming are coming from multilateral
donor agencies like DFID, World Bank etc. World Bank is carrying
the task through their Public Financial Management Reforms
(PFMR) programmes. It is intended to be achieved through
Kind Attention Members
Membership fees paid online by Net Banking and Debit/Credit Card will
be free of any convenience charges
62 The Management Accountant l August 2016
institutional strengthening, empowering staff with latest skills,
improving efficiency in audit procedures and processes including
use/development of IT tools. It involves developing/upgrading
audit procedures and manuals, demonstrating proof of concept
of risk based and management audit through pilots, capacity
building of audit staff, IT systems development/ implementation,
developing an external communications strategy and providing
handholding support. Assessing training needs and developing
course modules are also important components of the programme.
It is expected that with such comprehensive and positive pro-
active initiatives, India will surely present a model system of local
self governance cutting across the political agenda. MA
Foot Note
1. Democratic Decentralization by Camille Cates Barnett, Ph.D.
Henry P. Minis Jerry VanSant of the Research Triangle Institute
(USAID study, December 1997)
2. Decentralization and corruption: evidence across countries by
Raymond Fisman & Roberta Gatti (Journal of Public Economics
83 (2002))
3. Market Based Financing of Urban Infrastructure in India –
Chetan Vaidya (Paper presented to 13th Central Finance
Commission at IRMA, Anand)
4. Accounting and accountability in local government: An
Introduction by Delfina Gomes, University of Minho, Portugal &
Massimo Sargiacomo, University G. d’Annunzio, Italy (Accounting
History – Sage Publication)
samarray@hotmail.com
www.icmai.in
 BANKING
DISRUPTIVE INNOVATION
INDIAN
BANKING INDUSTRY

CMA S.Murali
Director, Enhance Your Competence
and Adjunct Professor, IBS Business School,
Bangalore

Banks are institutions which are engaged in the mobilization of savings in the economy and deploying the
same by lending to the needy. There was a complete shift in the way we did Banking pre nationalization
(1969), from ‘Class Banking’ we moved to ‘Mass Banking’ and ‘Security Oriented Lending’ to ‘Purpose
Oriented Lending’.There have been disruptive innovations in the Banking Industry in the new millennium. (
Since 2000). Core Banking Solutions, Internet Banking, ATMs, Mobile Banking, Micro Finance Lending, Speed
Clearing, Cheque Truncation System, Debit and Credit Cards, etc. to name a few. This article captures major
disruptive changes in the banking industry by classifying them into Changes in the Banking system, Changes
in the Deposits and Advances area and the Payment and Settlement systems. Banks have now become ‘One
Stop Solutions for the Financial Services’. Under one roof, the customer can get Banking, Insurance, Mutual
Fund services. Under Core Banking Solution (CBS), a customer is no more a ‘Branch Customer’ – HE is a
‘Customer of the BANK’. He can operate his account from any Branch. From Customer of the Bank we are
moving ahead to the ‘Customer of the Banking System’. Banking in the future will have to rely more on the
new generation technologies such as Social Media, Mobile, Analytics and Cloud (SMAC). (CII-KPMG Report
13 September 2013). This article details what could be the disruptions that Indian Banks could face in the next
four years.

“Change is the only Constant”. (Heraclitus).
“Whenever Change occurs, the ones who adapt to the
Change shines and those who do not, become victims of
change.”
The above statements apply to both organisations and the
individuals. Innovation brings about change in the process of
manufacture or features of a product. When an innovation by a
smaller company with fewer resources successfully challenges
established incumbent business we call it as ‘Disruption’. The
new entrants target segments over looked by the existing
players and offer products at much lower price. “Disrupters first
appeal to low-end or unserved customers and then migrate to
the mainstream market” (Clayton M.Christesen)
In the new millennium, we have come across lots of changes
which have re-defined the Banking services. Before the
introduction of Core Banking Solutions (CBS), the customer
had to go to that very branch where he maintained the account
for all his banking needs. After CBS, he can go to any branch
and get banking service. Thus, from the ‘Branch Customer’
he has now become a ‘Bank Customer’. The business hours
of banking, holidays or strikes by employees are having very
minimal impact on customer service due to the wide spread use
of technology. Automated Teller Machines (ATMs), Debit Card/
Credit Card, Internet Banking have revolutionized the mode
of banking operations. It is now 24 X 7 X 365 days banking
with “AAA” facility (Any Time Any Where Any How). The wide
spread use of mobile by Indian population in the past two
years has given a new dimension to the banking for the future
viz., M-Banking (Mobile Banking). The granting of licence to
Small Banks and Payment Banks will have great impact on

www.icmai.in August 2016 l The Management Accountant 63

BANKING

the Financial Inclusion efforts of the Government of India. The emerging market segment that is not being served by existing
issuance of Aadhaar Cards, implementation of Pradhan Mantri incumbents in the industry.
Narendra Modi’s Jan Dhan Yojana, Self Help Group Financing Some of the examples of Disruption are furnished in the
through Banks and Micro Finance Institutions (MFI), use of following table:
Business Correspondents by Banks are going to revolutionalise
the mode of disbursing credit to the needy sector of the economy. Established Technology Disrupted Technology

Theory of Disruptive Innovation (DI)
A disruptive innovation is an innovation that creates a
new market and value network and eventually disrupts an
existing market and value network, displacing established market
leaders and alliances. The term was defined and phenomenon
analyzed by Clayton M. Christensen beginning in 1995. More
recent sources also include «significant societal impact» as an
aspect of disruptive innovation (Wikipedia)
Christensen defines a disruptive innovation as a product
or service designed for a new set of customers. Christensen
describes that the disruptive innovation can take place in two
ways:
1. Low End Disruption: when a new entrant tries to satisfy
the need of low end customers of an existing product.
Here the new entrant tries to offer products at lower price than
existing players. This product may not have all the features of
the existing products which may be catering to the needs of high
end customers. In low-end disruption, the disruptor is focused
initially on serving the least profitable customer, who is happy
with a good enough product. Once the disruptor has gained a
foothold in this customer segment, it seeks to improve its profit
margin. To get higher profit margins, the disruptor needs to enter
the segment where the customer is willing to pay a little more for
higher quality.
Brick & Mortar Retailing On-line Retailing
Traditional Film Cameras Digital Camera
Offset Printing Digital Printing
Landline Plans Cell Phones
Traditional Brick & Mortar Banking Core Banking Software
Remittance by DD/Mail Transfer Mobile Banking
Sustaining Innovation Vs Disruptive Innovation
Each and every innovation cannot become Disruptive
Innovation. No company sits idle once a product is introduced
in the market. They will have an R & D Team which keeps
innovating new things in tune with the needs of the customer.
These innovations do result in increasing the market share and
the profits of the existing company. These types of innovations
are termed as ‘Sustaining Innovation’.
In contrast to the above, Disruptive Innovation caters to new
markets not tapped by the existing players. The changes are
dramatic and the traditional models are disrupted by the new
entrant.
The following table captures the difference between Sustaining
Innovation and Disruptive Innovation:

Sustaining Innovation Disruptive Innovation

Problem is well understood Vague

Existing Market Untapped New Market

Innovation enables improved

Innovation is dramatic and
Performance, lower costs and
game changing
incremental changes
Predictable Market Unpredictable Market

Elements of Disruptive Innovation:

Normally, a DI involves a sophisticated technology that
Chart 1 - How Low-end Disruption occurs over time simplifies the existing process, involves low cost business models
2. “New market disruption”: when a product fits a new or and the regulations that facilitate change.

64 The Management Accountant l August 2016 www.icmai.in


Indian Banking Industry – Disruptions in the New
Millennium
After understanding the basic concept of DI, let us look back at
the Indian Banking industry which has seen lot of disruptions that
have changed their business model. Herein below, the disruptions
have been discussed under two broad heads:
1. The structure of Banking System, the core banking business
model and their main functions of Deposits and Advances
2. Payment & Settlement Mechanism
Changes in the Structure of Banking System
a) Granting of Licence to Payment Banks and Small Banks
On 19th August, 2015, Reserve Bank of India granted in-principle
approval to 11 applicants for setting up Payment Banks. This
approval is valid for 18 months. These banks cannot undertake
lending activities and initially deposit is capped at Rs.1 lakh per
customers. 25% of their branches must be in unbanked rural areas.
Payment Banks will bridge the last mile between bank branches
and remote customer living in a rural pocket. They are permitted
to issue ATM and Debit Cards (not credit cards). They may also
offer internet banking services to leverage technology to offer low
cost banking solutions. They will essentially rely on technology to
reach payment services to all customers, using mobiles as a banking
vehicle.
RBI also granted approval for 10 Small Banks on 16th Sept 2015.
These banks are permitted to do lending activities unlike Payment
Banks which cannot. They have to advance loans primarily to the
unbanked, small businesses and farmers, micro and small industries
and unorganized sector entities which do not have access to finance
from the larger banks.
Both the above banks are going to displace existing banks’
importance in the Semi Urban and Rural areas. Due to the use of
latest technology their cost of operations would be much lower and
they would break even in the very first year of operation.
www.icmai.in August 2016
b) Introduction of Core Banking Solutions (CBS)
The scenario of banks’ operations before full computerization
is just unimaginable at this juncture. Since last decade Core
Banking has been introduced in all the Branches of all the banks.
CBS has changed the way banking was being done – need to go to
specific branch, only on working days and that too during business
hours, etc. Now, the customers are enjoying 24 X 7 X 365 days of
uninterrupted banking service. From the Customer of a Branch of
the Bank now we have moved to Customer of the BANK. A customer
can operate at any branch of the bank at any part of the country.
c) Growth of Virtual Banking
In the last five years, use of internets by Indian Population has
grown geometrically. With lot of young customers preferring to
do the banking operations through internet the importance of the
branch as POS is losing importance. Barring a few Senior Citizens
and rural customers, internet banking has helped a lot. As of Jan
2015, 75% of the Indian Population was having Mobile Phones.
With the rapid speed at which the mobile user is increasing it might
have touched nearly 90%. Customers have started using mobile
phones for internet banking. This has resulted in the reduced foot
falls in the brick and mortar branches of the banks. Virtual Banking
model is slowly picking up.
d) Introduction of Aadhaar and Prime Minister’s Jan Dhan
Yojana (PMJDY)
Unique Identification Authority of India (UIDAI), which
administers the Aadhaar scheme, as on March 2015 (Times of
India, 29.03.2015) has assigned 786 million Aadhaar numbers
across the country. PMJDY scheme was started with a target to
provide ‘universal access to banking facilities’ starting with “Basic
Saving Bank Account” with an overdraft upto Rs.5000 subject to
satisfactory operation in the account for six months and RuPay
Debit card with inbuilt accident insurance cover of Rs. 1 lakh and
providing social security schemes i.e., Pradhan Mantri Suraksha
Bima Yojana , Pradhan Mantri Jeevan Jyoti Bima Yojana & Atal
Pension Yojana .
Milestones achieved under PMJDY in just one year of its
implementation – August 2015
 Banks have opened 17.74 Crore accounts under PMJDY with
deposit of more than 22000 crores.
 Aadhaar has been seeded in 41.82% of account opened under
PMJDY
 Zero balance accounts in PMJDY have declined from 76% to
45.74% from September 2014 to 19th August 2015
 More than Rs 4273 crore have been routed through these
accounts till June 2015 towards payment of wages under MNREGA.
 DBTL transactions: Transfer of subsidy of more than Rs 17446
crore through Jan Dhan accounts from November 2014 to 31st July
2015.
l The Management Accountant 65
BANKING

Pradhan Mantri Jan - Dhan Yojana 

(Accounts Opened as on 20.04.2016)
(All Figures in Crores)

Bank NO OF AADHAAR BALANCE IN % OF ZERO-

RURAL URBAN TOTAL
Name RUPAY CARDS SEEDED ACCOUNTS BALANCE-ACCOUNTS

Public
Sector 9.50 7.49 16.99 14.37 8.13 28876.72 26.79
Bank

Regional
Rural 3.29 0.54 3.83 2.66 1.19 6480.21 22.65
Bank

Private
0.49 0.31 0.80 0.75 0.30 1402.37 39.31
Banks

Total 13.27 8.34 21.61 17.78 9.62 36759.30 26.52

Source: http://www.pmjdy.gov.in/account.

In the 21.61 Crores Accounts opened, Deposits balance was
Rs.36,759.30 Crores
PMJDY Scheme has not only found an entry in the Guinness
Book of World Records but along with Aadhaar Scheme has
revolutionalised the method of providing subsidies to the rural
people. Now, through the DBT (Direct Benefit Transfer), the
government assistance to the poor and needy (in the form of
subsidies, unemployment allowance, etc.) get directly credited to
their bank accounts. This has not only ensured that the benefit
reaches the poor but also helped in plugging the leakages in the
system. Government is contemplating to bring Kerosene also under
DBT scheme where the subsidy is very high and the misuse of the
same can be plugged.
e) Provision of all Financial Services under one roof
All categories of Banks (Public, Private or Foreign) have in the
last one decade become “One Stop Solution” for all financial service
needs of the customers. In fact, Banks are doing more of non
banking functions like Selling Insurance Policies, Mutual Funds
etc. These activities help them in getting Commission without the
risk associated with the lending and the need for maintenance of
capital for these businesses (Banks are required to maintain 9% of
their Risk Weighted Assets as Capital – CAR). Banks have set up
separate cells under various banners – Private Banking, HNI (High
Net worth Individuals) Banking, Wealth Management, etc. which
offer advisory services.
Loans under this have helped women in the rural and semi urban
areas to attain financial independence. Lending to this sector takes
two models:
i). Direct Lending by Banks to Self Help Groups.
NGOs assist in forming the groups, helping them mobilise
savings and maintain accounts. After the group attains experience
(termed ‘mature’), Banks lend money based on the savings of the
group and their activity needs. Banks have found that the Non
Performing Advances (bad debts) under this sector is very minimal
(less than 1%) because the group members take responsibility
for the payment of the loans taken by any member. Peer-level
pressure works well
ii). Banks Lending to Micro Finance Institutions (MFIs): MFIs
specialize in lending to this sector. They have corporate structure.
Some of them have come out with public issue and a few of them
got licence from RBI to start ‘Small Banks’. Here, the yield (interest
on advance) for the bank is low but so also the administrative
cost and risk of NPA. The MFIs lend to the SHG at higher rates of
interest and the difference forms their profit.
Micro Finance lending has disrupted the rural lending model
of the banks.
2. Changes in the Payment & Settlement System:
The passing of Payment and Settlement Act, 2007 and Payment
and Settlement Regulations 2008 (which came into force from
12.08.2008) has altered the payment & settlement space drastically.

f) Micro Finance /Self Help Group (SHG) Lending a. Speed Clearing and Cheque Truncation System (CTS)
Micro Finance refers to lending small amounts. Normally, it is Speed Clearing refers to collection of outstation cheques through
lent to a group of people. Most of the beneficiaries are women. the local clearing. It facilitates collection of cheques drawn on

66 The Management Accountant l August 2016 www.icmai.in

outstation core-banking-enabled branches of banks, if they have a implementation of NEFT and RTGS has again reduced the time
net-worked branch locally. This reduces the movement of cheques taken for crediting the account of beneficiary and the charges
from presentation center to the drawee centre and also the time (Exchange) for remittance also has become less. As observed in
taken for realisation of the outstation cheque. Earlier it used to the previous point, Banks lost the float of 7-10 days (from the DD
take anywhere between 1 to 3 Weeks for an outstation cheque to date to the date of clearance) here again and thereby cost of funds
get collected. Now, it is like any local cheque gets collected in 2 went up.
days (t +1=2 days).
Similar to Speed Clearing, CTS reduces the movement of c Moving towards Paperless System
outstation cheques and the days required for collection. Here, an Reserve Bank of India has introduced lot of new measures which
electronic image of the cheque is transmitted to the paying branch has reduced the use of paper and also usage of Cash. Some of
through the clearing house, along with relevant information like them are detailed below:
data on the MICR band, date of presentation, presenting bank, etc.  Electronic Clearing Service - ECS Debits & Credits
While in Speed Clearing the presence of the paying bank branch - ECS is an electronic mode of payment / receipt for
in the clearing house location is a necessity under grid-based CTS, transactions that are repetitive and periodic in nature.
the geographical coverage becomes more as the chances of paying ECS is used by institutions for making bulk payment
bank not having presence in the grid location is very rare. of amounts towards distribution of dividend, interest,
With the introduction of Speed Clearing and CTS the banks have salary, pension, etc., or for bulk collection of amounts
lost in two ways – one the commission income has lowered and towards telephone / electricity / water dues, cess /
second more importantly the float they were enjoying for nearly tax collections, loan instalment repayments, periodic
8-10 days has been lost. This has resulted in increasing the cost investments in mutual funds, insurance premium etc.
of funds to the Banks. Essentially, ECS facilitates bulk transfer of monies
from one bank account to many bank accounts or
b. New Speedy Electronic Modes of Remittance : NEFT vice versa.
& RTGS  Plastic Money – Debit Cards, Credit Cards and
National Electronic Funds Transfer (NEFT) is a mode of Prepaid Cards - Debit cards are issued by banks and
remittance where with the intervention of RBI, the funds get are linked to a bank account. Credit cards are issued
transferred between customers of different banks within the same by banks / other entities approved by RBI. Prepaid
day (2 to 4 hours maximum). NEFT is processed batch wise and it cards are issued by the banks / non-banks against
shall be used where the individual transaction is of the value of the value paid in advance by the cardholder and
below Rs.2/- lakhs. stored in such cards which can be issued as smart
Real Time Gross Settlement (RTGS) shall be used where the cards or chip cards, magnetic stripe cards, internet
amount of remittance is Rs.2/- lakhs and above. Here, the accounts, internet wallets, mobile accounts, mobile
beneficiary’s account is credit instantaneously (real time – wallets, paper vouchers, etc. All these cards can be
Maximum of 2 hours). used for purchase of goods and services at Point of
Prior to these new modes, customers used to send money from Sale (POS)/E-commerce (online purchase).
one place to another through Mail Transfer or Demand Draft. The
Payment System Indicators - Annual Turnover
Volume (Millions) Value (Rs. Billions)
Item % Change % Change
2015 2014 2015 2014
RTGS 92.8 81.1 14% 754032 734252 3%
ECS (Dr) 226 192.9 17% 1739.8 1268 37%
ECS (Cr) 115.3 152.5 -24% 2019.1 2492.2 -19%
NEFT 927.6 661 40% 59803.8 43785.5 37%
Debit Cards 808.1 619.1 31% 1213.4 954.5 27%
Credit Cards 615.1 509.1 21% 1899.2 1539.9 23%

Prepaid Instruments 314.5 133.6 135% 211.9 81 162%

Source: RBI Annual Report 2015

www.icmai.in August 2016 l The Management Accountant 67

BANKING
The above table gives an idea about the volume and value of
the transactions routed through the various modes of payment.
During the year 2014-15 total retail payments in volume was
4,620.9 million and the value was Rs. 1,54,129.3 billion. Of these,
Total Paper Clearing was 1,195.8 billion and the value Rs. 85,439.3
billion. The balance being Electronic Clearing. It can be observed
that Electronic clearing accounted for 74.12 % of the total
volume and 44.56% of the value.
Mobile Banking - Mobile phones, as a medium for extending
banking services, have attained greater significance because
of their ubiquitous nature. The rapid growth of mobile users in
India, through wider coverage of mobile phone networks, have
made this medium an important platform for extending banking
services to every segment of banking clientele in general and the
unbanked segment in particular.
What factors could be the Disruptors for the Indian
Banking Industry in the next 4 years ?
Chart 1: Source: Digits – Tech News and Analysis from WSJ –
oct29,2014
1. Technological Disruption in the Payment Industry:
Chart 2: Source: http://www.tcs.com/resources/white_
papers/Pages/Impending-Disruption-Payment-Marketplace.aspx
68 The Management Accountant l August 2016
Wide spread use of Mobile Phones is an enabler for payments
using technology and sometimes, without the intervention of the
Banks. 75 percent of the population has mobile subscriptions,
a total of 946 million. A deeper look into the web traffic in the
country reveals, 72 percent of all online activity in India is done
on mobile. Paytm, Oxigen Wallet and other payment agencies are
already being used by customers for making on line payments.
Vodafone M-Pesa is very popular for transfer of money from one
place to another.
The following Chart shows the usage of digital media in India
as on January 2015:
Chart 3: Source: https://www.techinasia.com/
indiawebmobiledatajan2015
Chart 4: Source: Digital Banking_BCG Report 2014
From the above chart, we can observe that the no. of phones
is already more than the number of active bank accounts. The
smart phone numbers in 2015 is 57.88% of the active bank
accounts. In the next two years it would reach 88.95% of the
active bank accounts. This implies that there will be a big shift in
the mode of banking operations and the ‘MOBILE/CELL PHONES’
are going to be in the lime light.
India to overtake US in smartphones by 2016’
“China will continue to lead the world rankings in 2016 with
www.icmai.in
624.7 million smartphone, followed by India (204.1 million), the
US (198.5 million), Russia (65.1 million) and Japan (61.2 million),”
the report said. (http://indiainbusiness.nic.in/newdesign/index.
php?param=newsdetail/10367)
As can be seen from the Chart 2 (Technology Disruption in
Payment Industry) Mobile would be used for variety of functions.
 Mobile Commerce – M-commerce (mobile commerce) is
the buying and selling of goods and services through wireless
handheld devices such as cellular telephone. Known as next-
generation e-commerce, m-commerce enables users to access the
Internet without needing to find a place to plug in.
 Mobile P2P - Person-to-person payments (P2P) is an
online technology that allows customers to transfer funds from
their bank account or credit card to another individual’s account
via the Internet or a mobile phone. There are two general
approaches for initiating a person-to-person payment:
In the first method, users establish secure accounts with
a trusted third-party vendor, designating their bank account
or credit card information to be used to transfer and accept funds.
Using the third party’s website or mobile application, individuals
can complete the process of sending or receiving funds. Users are
generally identified by their email address and can send funds to
anyone who is a member of the network.
In the second method, customers use an online interface
or mobile application (developed by their bank or financial
institution) to designate the amount of funds to be transferred. applications or advice on financial investments. This would mean
The recipient is designated by their email address or phone
number. In this method, recipients need not have an account with
the financial institution of the sender in order to receive a money
transfer.
 Mobile Wallet -  It is a mobile-based virtual wallet, where
a mobile possessor can preload a certain amount in an account
created with the mobile wallet service provider, The amount
loaded can be spent at online and offline merchants listed with
the mobile wallet service provider. Depending on the service
provider, you can also pay through app, text message, social
media account or website. State Bank of India’s mobile wallet
State Bank Buddy is a semi-closed prepaid wallet which can be
used to transfer money to other wallet users and bank accounts,
anytime, anywhere.
 Mobile Bill Pay – Use of cell phone for making utility
payments
 Mobile Cheque Deposit - As of now, this facility is not
available in India. In USA, any customer who gets cheque in
settlement of his dues need not visit branch/ATM/E Kiosk to
deposit the cheque. He can just take an image of the cheque
and send through mobile to the bank. Bank will do the collection
of the amount without the need of the cheque. The physical
cheque is either destroyed or cancelled by the account holder.
This is similar to the CTS which is now available for transactions
www.icmai.in August 2016
between banks/branches.
Omnichannel Banking
‘Omnichannel Banking’ provides a consistent experience across
channels to provide customers with seamless access to financial
products and services—where and when they are needed. In
the world of Omnichannel banking, customers are in control of
the channels they wish to use. For example, they can begin an
interaction using one channel (mobile while at home) and end
it in another (branch while on the way home from work). (Cisco
IBSG Global Research)
Omnichannel banking is different from the current
“multichannel” approach in which banks encourage customers to
use the least expensive channel, while delivering minimal cross-
channel consistency and an inconsistent user experience.
New Branch Model
Though this would be the traditional brick and mortar branch,
the type of functions that the bank would be doing in future is
different. Here only face-to-face customers who seek financial
services advice shall drop in.
Virtual Banking would be the order of the day
Video will be at the center of branch transformation. Customers
would prefer video conferencing for any clarifications on the loan
reduction in the no. of physical branches in the first instance
and in due course the number of banks. Already we have been
seeing that many of the Banks have introduced e-lobby, e-kiosks
etc wherein there would only be systems installed for drawing
cash, pass book updation, cash deposit, cheque deposit, pass
book printing.
Social Media, Cloud Technology and Analytics:
Social media can be used as an effective tool to interact with
the customers regarding queries and complaints. These can
also be used for transfer of funds. ICICI Bank had launched a
Facebook application called ‘Pockets’ in 2013. Kotak Mahindra
Bank launched KayPay, a bank agnostic payment product for
Facebook users to send money to each other.
The advent of Cloud Computing has resulted in the dismantling
of traditional cost structures. It enables organizations to shift
from a CAPEX heavy model to a variable cost model. Software
licenses, servers, networking equipments, storage devices are
typically considered to be the key CAPEX components. In a cloud
model, the bank pays for what it needs when it needs it. Cloud
also allows a bank to scale its business operations.
Analytics and Big Data are going to change the CRM (Customer
Relationship Management) in the banks. The role of analytics has
evolved from being a simple support function to that of a key
l The Management Accountant 69
BANKING
business differentiator.
Analytics today can be effectively deployed at every stage of
the consumer lifecycle. The Know your customer (KYC) activity in
the customer on boarding process is increasingly dependent on
analytics tools to identify the right set of customers. Anti-money
laundering (AML) monitoring is another aspect where complex
algorithms are used to identify reportable transactions.
Similarly consumer spend analysis can assist banks in
identifying cross sell and up sell opportunities.
Wearable Banking
With the innovation of Smart Watches, banking is slated to
shift from pockets to wrists. Wearable Banking will help banks
to roll out contextual notifications to clients. World of predictive
banking would emerge. Products will become more and more
customized to suit each of the customers. Banks can go beyond
banking by tracking the pulse rate, sleeping habits, daily exercise
and create customized insurance product at lowest insurance
premium. Use of smart watch may dispense with PIN and a
person’s heart beat may become the authentication factor. More
and more of biometric authentication may evolve. Wearables
may become a key device for multi-factor authentication. When
a customer passes through the branch of a bank he may get the
balance in his Savings Account.
Conclusion
Mobile Banking and Digital innovations are going to be the
disruptors of the Indian Banks in the next four years. The
following chart of BCG Analysis brings out a comparison between
the current model and the emerging paradigms
Chart 7: Source: Digital Banking_BCG Report 2014
70 The Management Accountant l August 2016
The future of the Banking would change from ‘Customer of a
Bank’ to ‘Customer of the Banking System’. Like Mobile Number
portability, the customer’s account number with a bank could be
used for transacting or availing services from any other bank. The
number of banks and branches would come down drastically. The
type of services rendered inside a physical branch would change
from the routine to the advisory nature. Many of the Private
Sector Banks are already in the advanced stage of preparation
in this area. It is the Public Sector Banks which have to cover a
lot of ground, without further delay, if they have to retain their
identity and grow in the business. MA
References
1. Reserve Bank of India Website: www.rbi.org.in
2. Thomas Mathew, TCS Financial Solutions, Impending Disruption in
the Payment Marketplace - Should Retail Banks be Worried? - A
Validation Using Porter’s Five Forces Framework
3. Productivity in Indian Banking 2014 - Digital Banking – BCG Report
2014
4. India: web, mobile, and social media data for early 2015 Tech in
Asia
5. Jörgen Ericsson, Philip Farah, Alain Vermeiren, and Lauren
Buckalew - Winning Strategies for Omnichannel Banking Cisco
IBSG Global Research Reveals New Ways for Banks To Prosper in
an Omnichannel World
6. Reserve Bank of India’s Report on Trend and Progress of Banking
in India 2014-15
7. Reserve Bank of India’s Annual Report 2015
8. Indian Banking - Maneuvering through Turbulence: Emerging
strategies – Study by KPMG and CII – 2013
9. Shivani Misra – Trending Technology in Remittances – Indian
Banker – December 2015
10. Clayton M.Christensen , Michael Rayor and Rory McDonald –
Disruptive Innovation – HBR – South Asia – December 2015
11. M.Yadagiri and G.Srinivas - Payment Banks: Empowering Digital
India.– Management Accountant – October 2015)
smurali77@yahoo.com
www.icmai.in
 COMPANIES ACT
Reporting
Reporting
of
of
Frauds
Frauds
www.icmai.in August 2016 l The Management Accountant 71
C O M PA N I E S A C T
CMA Vineet Agrawal
Consultant
New Delhi
I
n this article we will understand the various issues that
may arise while reporting for fraud as per Companies
Act 2013. Let’s first understand the law relating thereto.
Section 447 of The Companies Act 2013 as
applicable from 1st April 2014 defines Fraud as “Fraud
in relation to affairs of a Company or any body corporate,
includes any act, omission, concealment of any fact or abuse of
position committed by any person or any other person with the
connivance in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the Company or its
shareholders or its creditors or any other person, whether or not
there is any wrongful gain or wrongful loss.”
Section 143(12) of Companies Amendment Act 2015 states
that-
“Notwithstanding anything contained in this section, if an
auditor of a Company in the course of the performance of
his duties as auditor, has reason to believe that an offence of
fraud involving such amount or amounts as may be prescribed,
is being or has been committed in the Company by its officers
or employees, the auditor shall report the matter to the Central
Government within such time and in such manner as may be
prescribed.
Provided that in case of a fraud involving lesser than the
specified amount, the auditor shall report the matter to the audit
committee constituted under section 177 or to the Board in other
cases within such time and in such manner as may be prescribed.
Provided further that the companies, whose auditors have
reported frauds under this sub-section to the audit committee
or the Board but not reported to the Central Government, shall
disclose the details about such frauds in the Board’s report in
such manner as may be prescribed.”
As per Section 143(13) No duty to which an auditor of a
Company may be subject to shall be regarded as having been
contravened by reason of his reporting the matter referred to in
sub-section (12) if it is done in good faith.
While based on Section 143(12) of Companies Act 2013 above
provisions applies to Chartered Accountants (Statutory Auditor),
Section 143(14) of Companies Act 2013 makes above provisions
72 The Management Accountant l August 2016
applicable to Cost Accountants and Company Secretaries also
for their audits done under sections 148 and 204 respectively.
Section 139 makes this applicable to branch auditors.
Section 143(15) If any auditor, cost accountant or Company
Secretary in practice do not comply with the provisions of sub-
section (12), he shall be punishable with fine which shall not be
less than one lakh rupees but which may extend to twenty-five
lakh rupees.
Rules for fraud Reporting
Rule 13 of the Companies (Audit and Auditors) Amendment
Rules, 2015 relate to reporting of frauds by auditors which is given
below:
(1) If an auditor of a Company, in the course of the performance
of his duties as statutory auditor, has reason to believe that
an offence of fraud, which involves or is expected to involve
individually an amount of rupees one crore or above, is being
or has been committed against the Company by its officers or
employees, the auditor shall report the matter to the Central
Government.
(2) The auditor shall report the matter to the Central
Government as under:-
(a) the auditor shall report the matter to the Board or the
Audit Committee, as the case may be, immediately but
not later than two days of his knowledge of the fraud,
seeking their reply or observations within forty-five days;
(b) on receipt of such reply or observations, the auditor shall
forward his report and the reply or observations of the
Board or the Audit Committee along with his comments
(on such reply or observations of the Board or the
Audit Committee) to the Central Government within
fifteen days from the date of receipt of such reply or
observations;
(c) in case the auditor fails to get any reply or observations
from the Board or the Audit Committee within the
stipulated period of forty-five days, he shall forward
his report to the Central Government along with a note
containing the details of his report that was earlier
forwarded to the Board or the Audit Committee for
which he has not received any reply or observations;
www.icmai.in

Companies Act 2013 has
changed the way frauds in
Companies are treated and
reported. Fraud is defined in
the Act for the first time. Au-
ditors are mandated to report
frauds to the Ministry of Cor-
porate Affairs. There are cer-
tain conditions that must be
met before any case is catego-
rized as fraud and reported to
the Central Government. For
easier understanding, relevant
clauses of Act and Rules are
compiled here. Reporting pro-
cess for cases that do not fulfill
the conditions of reporting to
Central Government is also
mentioned.
www.icmai.in
(d) the report shall be sent to the Secretary, Ministry of
Corporate Affairs in a sealed cover by Registered Post with
Acknowledgement Due or by Speed Post followed by an
e-mail in confirmation of the same;
(e) the report shall be on the letter-head of the auditor
containing postal address, e-mail address and contact
telephone number or mobile number and be signed by the
auditor with his seal and shall indicate his Membership
Number; and
(f) The report shall be in the form of a statement as specified
in Form ADT-4.
(3) In case of a fraud involving lesser than the amount specified in
sub-rule (1), the auditor shall report the matter to Audit Committee
constituted under section 177 or to the Board immediately but not
later than two days of his knowledge of the fraud and he shall
report the matter specifying the following:-
(a) Nature of Fraud with description;
(b) Approximate amount involved; and
(c) Parties involved.
(4) The following details of each of the fraud reported to the
Audit Committee or the Board under sub-rule (3) during the year
shall be disclosed in the Board’s Report:-
(a) Nature of Fraud with description;
(b) Approximate Amount involved;
(c) Parties involved, if remedial action not taken; and
(d) Remedial actions taken.
(5) The provision of this rule shall also apply, mutatis mutandis,
to a Cost Auditor and a Secretarial Auditor during the performance
of his duties under section 148 and section 204 respectively.”
Above rules do not apply to internal audit as covered by Section
138 of Companies Act 2013.
As per Companies (Auditor’s Report) Order 2015, audit reports
in addition to various matter prescribed also mention whether
any fraud on or by the Company has been noticed or reported
during the year; If yes, the nature and the amount involved is to
be indicated.
Now after understanding the law and the rules thereof let’s
understand the practical aspects arising out of it.
Conditions that must be fulfilled in order to send the report to
Central Government:
1. There must be a fraud that has happened or happening.
An event to fall under the category of fraud must fall under its
definition and most important part of the same is the word intent.
Unless intent is proved along with other requirements, any activity
cannot fall under the category of fraud and thus report need
not be submitted to Central Government. This clearly takes out
cases where errors happened and intent could not be proved. For
August 2016 l The Management Accountant 73
C O M PA N I E S A C T
Example, Misstatement in Financial Statement if done with the
intent, could be reported if other conditions are met. However, if
such misstatement is due to error then it should not be reported.
A study conducted by Association of Certified Fraud Examiners
show that globally less than 3% of frauds are detected by way
of external audit in large organizations and only 6% in small or
medium organizations. The figure is 1% in case of South Asia.
2. Fraud is suspected or there is reason to believe that it is
happening or it has happened. Once the definition of fraud is
fulfilled by any event and intent is proved, this condition will be
met automatically.
3. Fraud is found in the course of audit. Only those cases
have to be reported to the Central Government that are found
during the course of audit u/s 139, 143, 148 and 204 after 1st
April 2014. Thus, cases found during performance of other attest
and non-attest services can be reported to Central Government
if such services are done within the ambit of Companies Act
2013 by the persons covered u/s 139,143,148 and 204. Cases
found through internal audit are not mandated to be reported to
Central Government. Reason could be due to the fact that many
organizations have their own internal audit departments.
4. Fraud should have been done or being done by the officer
or employee of the Company being audited. As the condition
clearly specifies, fraud done by outsiders like contractors,
suppliers, customers, by way of hacking by an unknown person,
etc. need not be reported to Central Government. However,
cases where there is collusion between officer or employee of the
Company and any outsider, such cases also need to be reported
to the Central Government.
5. Fraud should have happened in the Company. Since
auditor takes up the audit of a Company they need to report for
what’s happening in the Company and not in other Company.
Here it may be noted that listed / unlisted, small / large and
holding / subsidiary companies are not differentiated. Each
Company is a separate legal entity and thus a separate auditor
is appointed or separate audit assignment is given. Cases where
a Company falls under the regulated sector and is mandated to
report the frauds to the regulator like RBI, report should be sent
by the Company (not by auditor unless required by law) to such
regulator in their prescribed format/procedure.
6. Approximate value of fraud individually should be in
excess of Rupees One Crore. Here the word individually must
be adhered. It might happen that during the same audit an
auditor may find more than one fraud case both falling below the
threshold limit. In such cases auditor must be extra cautious to
74 The Management Accountant l August 2016
check again if such frauds are linked. For example, Cost Auditor
and Secretarial Auditor may find different types of frauds within
their audit scope thus such frauds may not be linked or clubbed
together.
It may be noted that fraud cases found during course of audit
are to be reported i.e. related to their domain area like cost audit
by a cost accountant, secretarial audit by a Company Secretary
and statutory audit by a chartered accountant. Out of the three
professionals, the one who detects the fraud first should report it
to Central Government and other should evaluate the same about
the correctness and steps taken. Other professionals should
evaluate only if such frauds falls under their scope of audit. If
they are satisfied, then they should mention the same in their
report. If they are not satisfied and after further review there is
some change than what was reported earlier then such auditor
should report again.
Information that needs to be submitted to Central Government
in Form ADT-4 includes:
a) Address of the office or location where the suspected offence
is believed to have been or is being committed,
b) Full details of the suspected offence involving fraud,
c) Particulars of the officers or employees who are suspected
to be involved in the commission of the offence,
d) Basis on which fraud is suspected,
e) Period during which the suspected fraud has occurred,
f) Estimated amount involved in the suspected fraud.
This clearly means that some amount of investigation is
required by the auditors before submitting the report. Auditors
are not expected to take up Fraud investigation assignments by
themselves, for that management may give separate assignment
to a specialised agency. It may also be noted that reporting period
of sixty days (forty five and fifteen days) start when all above
conditions are met.
In details of action taken, management may inform the auditor
that matter is under further investigation and same may be
informed by auditor in its report to the Central Government. In
order to show genuine intent to recover money lost due to such
fraud; it is safer to file a First Information Report (FIR) with the
Police. Central Government may question the non-filing of FIR.
Filing of FIR means that remedies under Indian Penal Code (IPC)
are sought.
Once the investigation of a fraud case is completed, the
Company has to write off the defrauded amount from the books.
FIR and investigation report would help the Company in claiming
such amount as business expense with Income Tax Department.
It may also be noted that reporting of fraud by an auditor
to any external agency in compliance with any law in force at
that time does not invoke professional misconduct proceedings
against the auditor. A clause to this effect may be incorporated
www.icmai.in
in the engagement letter in order to avoid any confusion with the
management of the Company.
All the fraud cases that are not required to be reported to
Central Government under rule 13 can be classified and dealt
with as follows:
Cases found during Statutory Audit that are below the
threshold limit of Rupees One Crore individually.
Such cases need to be reported within 2 days to the Board
or Audit Committee as the case may be (Rule 13(3)). Such cases
need to be mentioned in Board’s Report (Rule 13(4)) and Auditor’s
Report (CARO 2015).
Cases that are not detected during the course of audit u/s
139, 143, 148 and 204.
Here cases found during internal audit done during the year
under Companies Act 2013 are covered. In such cases, comments
of the Board or Audit Committee need to be taken. Such cases
need to be mentioned in Auditor’s Report.
Cases found during attestation services or during any
other services (like Tax/VAT/Service Tax Audit, merger and
acquisition or valuation) provided during the year but not
covered under Companies Act 2013 or provided by those who
are not covered u/s 139,143,148 and 204.
In such cases, comments of the Board or Audit Committee
need to be taken. Such cases need to be mentioned in Auditor’s
Report. This is because certain services can be provided by other
professionals who are not Statutory Auditors, Cost Auditor and
Secretarial Auditor.
Cases involving persons other than officer or employee of
the Company.
These are the cases where contactors, suppliers, customers,
consultants, etc. are covered. In such cases, comments of the
Board or Audit Committee need to be taken. Such cases need to
be mentioned in Auditor’s Report.
Cases of fraud found by Management through its internal
system or though any other external system (like Forensic
Audit done as a special assignment).
Auditors need to evaluate such cases independently and
www.icmai.in August 2016
mention in their Audit Report. In case during evaluation there is
any change like increase or decrease in amount of fraud or nature
of fraud or if auditor is not satisfied with the action taken by the
management, then in such cases auditor should report to the
Central Government.
Cases of fraud found in Subsidiary Company and reported
to Central Government.
Such cases need not be reported again to Central Government
as part of audit of Holding Company. However, such cases need
to be mentioned in Auditor’s Report of the Holding and Subsidiary
Company both.
Cases where audit happened prior to 1st April 2014 i.e.
the date when Companies Act 2013 came into force but
investigation concluded after 1st April 2014.
It might happen that audit of a Company was completed
under Companies Act 1956 and fraud was reported accordingly
but investigation of that fraud concluded after 1st April 2014.
Since final impact of such fraud will be reflected in the financial
statements audited after 1st April 2014, such cases will again form
part of Board’s and Auditor’s Reports.
Auditors are advised to take up audit assignments based
on auditing standards. In order to avoid being penalized as
mentioned in Section 143(15), auditors must retain the audit
papers like daily planning and observation papers, draft
reports, management’s reply to the draft report and also the
data taken from software. Auditors may take an undertaking/
letter from the management of the Company clearly specifying
if any fraud was detected during the year and if detected, the
details thereof. These documents will help auditors to put forth
their case where fraud gets detected by someone else and
auditors are called in to explain why they could not detect the
fraud during the audit. MA
References
1. Website of Ministry of Corporate Affairs – www.mca.gov.in
2. Website of Reserve Bank of India (RBI) – www.rbi.org.in
3. Website of Association of Certified Fraud Examiners (ACFE) -
www.acfe.com
vineet.starifa@gmail.com
l The Management Accountant 75
TQM

TQM:
‘A tool of business excellence

through customer delight’

Er. Vitin Kumar

Assistant Engineer
Bharat Heavy Electricals Limited
Allahabad

“In today’s globalised world, where geographical Boundaries are slowly becoming meaningless, the question of business
sustainability is to be seen in more than individual country’s trade policies, or the capability of producing goods or services.
Cost, which is key of success or failure for any economic activity demands focus on the product acceptability in the mind of
customer. Product or services with secured, royal and satisfied customers are capable of fetching more revenues than the
other ones. Thus whole system has to be aligned with the customer satisfaction which may be expressed as the gap between
actual and accepted performance of product or services available to him”. Before taking about modern quality management
systems and philosophies, historical aspects of quality may be looked into;

76 The Management Accountant l August 2016 www.icmai.in

 After First World War, there was a need of large-scale
production, which demanded the formation of association and
institutions to formalized ideas. In this series, after Second World
War, American Society for quality control, a body of association
of quality specialists, who have been trained mostly by the
war production, was formed. But, the turning point for quality
thinking was emerged in one of the defeated nations. Japanese
started a nationwide drive for expansion, pursuing economic
rather than military goals in the leadership of W. Edward Deming.
By the 1970s, the Japanese have become “Masters” at achieving
quality in their manufacturing sector. But, they never stopped
on this achievement and their quest for superior production by
continuous improvement in knowledge, methods and techniques.
The Japanese were first in shifting commercial interests from
competition in productivity to competitiveness in quality.
World recognized that Japanese success was not only due to
national, cultural and social differences, but reflected strongly
a new attitude and desire of Japanese management to ensure
the consumer’s promise was fulfilled . The 1980’s was an era of
competitive challenge with resting on the quality Management.
Going forward, several international Quality Assurance
Management systems (ISO 9000) acted as catalyst. 1990’s
and beyond, the quality management has become international
management Philosophy.TQM is the one of philosophy.
As we discussed in first paragraph the customer satisfaction
which may be expressed as the gap between actual and accepted
performance of product or services available to him. Customer
delight is something more than customer satisfaction.
How to fill or narrow this gap? How to delight customer?
Total Quality Management is a philosophy of continuously
improving the quality of the products and services, meeting the
customer requirements. TQM is a process rather than an activity
or an act. It is a discipline rather than a department of a factory
or an establishment. It demands involvement of all, rather than
management or worker. It demands of implementation in all
functions from general administration to research & development
work.TQM recognize the need to manage sets of interacting
issues viz. technical, cultural, economical, political etc.
The whole aim is to achieve delight, which is subjective
and dynamic in nature and has to be carefully examined and
evaluated. This paper is a sincere attempt to explain how TQM
may act as a tool of business excellence.
TQM can be split in,
T-stands for total, means it has to cover every sphere of
activities with active involvement of all persons at different level.
Q-stands for quality, to recognize and adhere with what
customer wants/ requirements
M –stands for management –the entire process must be
managed professionally.
www.icmai.in
Approaching TQM-
Extent of disintegration of whole system into subsystems and
reintegration after implementing quality management technique
in all subsystems will be the degree of success of TQM. But,
several limiting factors come in way to limit the disintegration.
Continuous improvement is pre-condition of success of TQM.
PDCA cycle which is also known as deeming wheel shows the
continuous movement in certain direction. In PDCA, Plan
defines the process, Do execute the process and collect required
information, Check analyze the information and Act obtain
corrective measures. PDCA is a cyclic process.
PDCA CYCLE
Essentially, TQM comprises following stages:
Identification: Problem identification is very first step towards
problem solving. In this stage, information about the prime areas,
where improvement will have most impact are identified and
detailing of work, which needs to be executed is analyzed from
techno-financial viewpoint. It is very important to understand
that every act major or minor will have a cost, so cost/benefit
analysis must be carried out. Views and opinion of different
stakeholder’s viz. customer, suppliers, distributer, other supply
chain members employees and difference or similarities among
them shall further pave a way.
Management: Management must understand the objective
and methodology of TQM and is ready to adopt. For many
companies, TQM may call a major change in the management
practice and sometime it becomes difficult to implement in short
time. Appropriate management education in their understanding
and approaching TQM is a matter of paramount concern. By
properly understanding, principal and practice of TQM the
managers rightly demonstrate their commitment in quality
improvement process.
Improvement: In developing quality improvement scheme,
department / division wise problems of each division, in each
department are considered. A scheme of training for improvement
August 2016 l The Management Accountant 77
TQM
may be framed after the analyzing following aspects of the
organization. They are:
1. Reason of establishment of the department/division
2. Level of attainment of customer needs
3. Level of customer satisfaction
4. Customers and suppliers relationship
5. Cause effect analysis
6. Preventive measures of recurring problems
7. Improving efficiency
Before selecting point of improvement, an exhaustive analysis
is required as any scheme for improvement requires substantial
investment in training, management time and communication.
(A) Review and analysis: At this stage review and analysis is
carried out and related information of the complete improvement
process is shared with everyone indicating supplier and customer
links in the quality chain. This also demands information
about progress and consolidates success. For effective results,
everybody in the organization must assess the TQM process.
Incorporations of the perception of internal and external
customers are most important. It is also important to establish
some feedback system of the success on a regular basis and at
the same time the individual and team contributions are given
the due recognition. Setting up of new targets as required by
customers at this stage will automatically upgrade the quality
standard of the organization and maintain the competitive
position in the market place.
Techniques for TQM: One or combination of following stated
technique can be selected for improvement –
COMPONENT OF TQM
A - Customer’s perception surveys: This is very first step
in TQM, Surveys may be conducted through voice call, paper
78 The Management Accountant l August 2016
feedback or online.
B-Quality function deployment: A robust quality function
must be developed.
C-Business Process Reengineering (BPR): BPR is a business
management strategy, focusing on the analysis and design of
workflows and processes within an organization.BPR aimed to
help organizations fundamentally rethink how they do their work
in order to dramatically improve customer service, cut operational
costs, and become world-class competitors.
D-Cost of quality statement: Cost statement help to trace the
cost pattern, cost statement format as prescribed by ICAI may be
used for this purpose.
E-Top team workshops: By organizing top level executive
workshop goal, awareness, action plan and it implementation
can be explored.
F-Quality seminars: QS may be organized at various levels
calling some of the industries experts / experts from universities
or reputed institutions to develop conductive environment within
organization.
G-Departmental analysis: Conduct detailed departmental
analysis and take measures wherever required
H-Quality training: Appropriate training mythology need to be
developed and implemented.
I-Quality circles: Various groups may be formed from various
functions to organization of quality circles
J-Suggestion schemes: Suggestion scheme e.g. Kaizan , may
be implemented.
K-Process management: A dedicated process management
system is key of process improvement.
L-Just in Time Manufacturing (JIT): JIT approach used in
inventory and product handling, companies can often cut costs
significantly. Inventory cost contributes heavily to the company
expenses, especially in manufacturing organizations.
TQM Model
Customer delight is the aim of TQM. A typical model shown
in fig highlights how the implementation of TQM benefits the
organization in long term and short term and in turn achieves
the customer delight, a step ahead from customer satisfaction.
When the customer expectations from product or service are
balanced by actual product quality offered to him, the customer
satisfaction is as results. But, if the actual quality standards
exceeds from customer expectation, this results in customer
delight. TQM aims at customers delight going one step ahead
of mere satisfaction of customers. The delighted customer will
become the loyal customer and have a complete trust in the
offering of the company’s products and services. The quality of
the product results in higher reliability of which in turn helps to
attain the retention of loyal customer base.
www.icmai.in
 by loyal and satisfied customer base results in enhancing
competitive position of the company. The organizational benefits
of implementing TQM include – reduces cost and cycle time.
Job satisfaction and reduces turnover of employees, Increase in
productivity and reward for all the stakeholders.

TQM Critical Success Factors

Successes of TQM depends on effective integration of the
following factors-
1. Training
2. Bench marking
3. Customer satisfaction surveys
4. Recognition and rewards
6. Management commitment

TQM MODEL
The quality of the product depends on the ability of the
company of identify both stated and unstated needs, translation
of these needs into design specifications, and designing and
managing quality level as per design specifications and ensuring
performance. This is achieved through a well placed quality system
and involvement of employees at all the levels. The continuous
improvement in quality is the result of empowered employees and
the leader ship of the management.
Thus higher quality levels of products/ services accompanies
Conclusion
It is well established fact that, TQM can deliver desired result
to support business excellence by achieving customer delight.
Viewing it in macro level, this not only serve to individual group of
customer or company, but effect may be search at microeconomic
level and at macroeconomic level. This ensures optimum utilization
inputs i.e. natural resources, which in turn drive the economic
cycle much efficiently. MA
vitin@bhelpsnr.co.in

Articles invited

We invite quality articles and case studies from members in the industry with
relevance to Cost and Management Accountancy, Finance, Management,
and Taxation for publication in the journal. Articles accompanied by color
photographs of the author can be sent to: editor@icmai.in

www.icmai.in August 2016 l The Management Accountant 79

BANKING

Dr. Goutam Bhowmik

Assistant Professor
University of Gour Banga
Malda

T
he Sumerians of Mesopotamia, one of the oldest civilizations, first used gold as sacred, ornamental, and decorative
instrument in the fifth millennium B.C. The early Egyptians used gold primarily for personal adornment, rather than
for monetary purposes, although the kings of the fourth to sixth dynasties (c. 2700 - 2270 B.C.) did issue some gold
coins (HDFC Securities, 2015). From the Indian point of view, gold in the form of jewellery is quintessential item in
most of our social customs and celebrations, festivals, marriages, anniversaries, religious rituals, etc as because
it symbolizes the status and wealth. This is why, investment in physical gold keeps on growing over decades. As
a commodity, demand for gold in India is interwoven with culture, tradition, the desire for beauty and the desire for financial

80 The Management Accountant l August 2016 www.icmai.in

protection thereby making its consumption and investment very
different from that of other countries.
Traditionally, India has been the largest consumers of gold in
the world although China occupied the number one position very
recently. Still India accounts for significant proportion of world
gold demand. For example, India accounted for 24.8% of total
physical gold demand of the world during the quarter ended
June 2015 (GFMS, Thomas Reuters, 2015). This is just one side
of the coin. The other side of the coin is that Indian gold demand
is heavily dependent upon imports which adversely affect the
Balance of Payment (BOP) positions and more specifically,
Current Account Deficit (CAD). It is because of this, Dr. A. Didar
Singh, Secretary General of FICCI opined, “Gold has never been an
easy product around which policy could be formulated. Policies
around gold and to some extent business plans and financial
innovations related to gold have all largely been based on a
couple of assumptions, such as:
(a) Demand for gold in India will never wane;
(b) People in India will not part with their gold easily;
(c) Women are sentimentally attached to their jewellery and
hence will not part with it;
(d) If given a choice between cash or gold, Indian people will
opt for gold.
At various points of Indian history, one or all of these
assumptions have been true.” Given this background, the present
paper primarily attempts to capture the Indian perspective with
regard to the gold policy since independence with major emphasis
on recently launched Gold Monetization Scheme. Apart from
highlighting the investment options available w.r.t. gold, the paper
captures the essential features of all three components of Gold
Monetization Scheme (GSM) along with its pros and cons.
2. Investment Options in Gold
Gold has always been an integral part of the socio-economic
ethos of the Indian household. India has an ambivalent relationship
with gold. For consumers, gold is a prized asset, cherished as
both an adornment and an investment. From Indian perspective,
followings are the investment avenues relating to gold.
2.1 Jewellery
jewellery may not be considered as investment as it is generally
not made from 24 carat gold; it is generally made from 22 carat
or 18 carat gold since 24-carat gold is brittle and cannot be set to
beautiful designs of jewellery. Investors have to pay for the making
charges and wastages. When liquidated, the making charges,
impurities and wastage will be cut and investors may end up getting
less than what had invested. Still the Indians especially women
considered jewellery as a safe form of investment. For example,
according to World Gold Council (2015) demand for gold in India
constitutes of jewellery (56%) followed by investment purposes
www.icmai.in August 2016
(27%) and industrial use (17%).
2.2 Gold bars or coins
Government-certified gold coins or bars have purity level of close
to 99.9. Banks charge extra for their coins of anywhere between
5% and 10%. Also the bank coins have lesser liquidity as they are
not bought back by the banks. Bullion bars are good modes for
investment but the minimum investment is much higher.
2.3 Gold certificates
It is a certificate which represents ownership of gold bullion held
by a financial institution for convenient and safe storage. There is
a fee for storage and insurance.
2.4 E gold
National Spot Exchange Limited (NSEL), India used to offer
E-series to invest in gold. Retail investor can trade in commodities
especially precious metal like gold in e-form. Like equities one can
keep their gold in demat form, which not only saves on insurance
cost and locker rent but also one can invest in small denominations.
2.5 Gold Exchange Traded Funds (Gold ETFs)
They are mutual fund schemes, listed on the stock exchanges and
traded like shares. The pooled amount is invested in the physical
gold. When redeeming the units, investor can go to the fund house
or sell in the market and get them converted in to cash. Gold ETFs
are proving to be an easier and safer mode to buy gold. The charges
are very less and the gold can be accessed electronically.
2.6 Gold Mutual Funds:
Gold mutual funds hold portfolios of gold mining companies and
are directly linked to gold prices. They are actively managed as
they are handled by the fund managers. In the Union Budget 2015,
the Finance Minister proposed two significant schemes pertaining
to the gold - Gold Monetization Scheme (GMS) and Sovereign
Gold Bond (SGB). These developments will be discussed in latter
sections.
3. Review of Indian Gold Policy since Independence
3.1. Four Phase of Indian Gold Policy
Gold policy has been a challenging task for Indian policymakers
since independence. As India relied upon heavily on import of gold
in order to fulfill domestic demand, the policy needs to be changed
and modified from time and again in view of the BOP positions,
Current Account Deficit (CAD), Foreign Reserve Position, smuggling
of gold, etc. To understand such volatile policy stance, a recent
FICCI and World Gold Council study (2014) divide the whole period
since independence into four phases. The essence of the policies
and their consequences are presented in the Figure 1 below:
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BANKING
Figure 1: Essence and Consequences of Indian Gold Policy since Independence
Phase 1: Gold Control Policy (1947 – 1963)
Policy Prescriptions
 Foreign Exchange Regulation Act (FERA) in 1947
 Nationalization of Kolar gold mine at Mysore in 1956
 Replacement of the proportional reserve system with
the minimum reserve system for currency issue in
1956
 First Gold Bond Scheme introduced in 1962
Consequences
 During this phase policies are largely proved
ineffective in controlling the gold market in India.
 Failed to wean people away from gold, to regulate
supply of gold, and smuggling.
 But surprisingly, the policies proved to be effective in
stabilizing the domestic price of gold.
Phase 3: Post-Liberalization Policy (1990 - 2007)
Policy Prescriptions
 BOP Crisis and Gold Mortgage by India
 Gold Control Act, 1968 repealed in June, 1990
 NRI Scheme introduced in March, 1992
 Scope of Special Import License (SIL) scheme
expanded to include gold in April 1994
 Seven Banks authorized to import gold in August 1997
 Gold Deposit Scheme (GDS) launched by State
Bank of India in 1999
Consequences:
 During this phase, demand continued to rise but it
was met primarily through official channels.
 Smuggling was curbed, the price differential between
the domestic and international gold market narrowed
and the government earned revenue through import
tariffs and domestic taxes.
Source: adopted & improvedfrom FICCI - World Gold Council Report - (2014)
82 The Management Accountant l August 2016
Phase 2: Pre-Liberalization Policy (1963 – 1990)
Policy Prescriptions
 Gold Control Rules (1963)
 Gold (Control) Act (1968)
 Gold Bonds 1980 (March, 1965)
 National Defence Gold Bonds 1980 (October,1965)
 Voluntary Disclosure of Income and Wealth
 (Amendment) Ordinance (1975)
 Gold auctions (1978)
Consequences
 Research indicates that successive attempts to curb
demand for gold have proved ineffective. Restrictive
import policies have had a limited effect on demand.
 Instead, they have led to increased smuggling. The
gold smuggled into India between 1968 and 1995
varied from 10 to 217 tons per year.
Phase 1: Policy since Recession (2007 onward)
Policy Prescriptions
 Global recession of 2007 and its impact on gold
demand
 Gold Demand’ surge – Post recession
 Inelasticity of gold demand to its price
 Negative effect of gold demand on CAD
 Government initiatives – a negative approach to gold
policy
• Prominent feature of phase II
• Is it counterproductive?
Consequences:
 Gold demand in 2007, demand was 796.1 tones. It
peaked at 1022.3 tons in 2010, reduced slightly in
subsequent years and reached 975 tons in 2013.
 At the same time, the gold price (10 grams) almost
trebled from ` 9223.7 in 2007 to ` 26440.2 in 2013.
 In order to control CAD and reverse the depreciation of
the rupee, the government has introduced restrictions
on the gold market once again.
www.icmai.in
3.2 Present Policy Stance and Implications
The present situation has not been changed. For example,
India imported 661.4 tons of gold worth $ 33 billion in 2013-
14 and import of gold after deduction of export of gems and
jewellery constitutes nearly 25% of India’s trade deficit in
the same year. As a result of these, the Government of India
tried to restrict the import of gold through various measures,
such as increasing import duty of gold, stipulating additional
conditions such as ‘80:20 rule’1 for gold imports, etc. Though
these preventive measures helped in bringing down our CAD
to some extent, it ultimately resulted in unbridled smuggling
of gold into the country through various channels. For
example, the illegal import of gold seized by the Customs
Authorities touched the highest point of Rs. 690 crore during
2013-14 (Saravanan, P., Srikanth, M. and Avabruth, M,
2015).
The above consequences of the different policy regimes
suggest that demand for gold is not curtailed by policy
intervention. It is a very important understanding that
would have far reaching impact in order to decide the
means and ways to capture value out of the economically
and traditionally significant asset like gold. The appropriate
policy should accept India’s affinity with gold and put that
affinity to work for the benefit of consumers, industry and
for the economy. With this end in view and keeping in
mind the successful gold monetization model of Turkey,
the Government of India, in its maiden budget for 2015-16
announced Gold Monetization Scheme or GMS.
4. Indian Gold Monetization Scheme (GMS)
As per budget commitments, Government of India launches
two major gold related investment schemes to unlock the
value hidden in idle gold possessed by households and
institutions5th November 2015. These are as under:
u Gold Monetization Scheme (GMS) comprising of
revamped Gold Deposit Scheme (GDS), introduction of Indian
Gold Coin (IGC) and Sovereign Gold Bond (SGB).
u Gold Bullion Scheme (GBS).
The GMS has three Components – Revamped Gold Deposit
Scheme (GDS), Sovereign Gold Bond (SGB) and introduction of
Indian Gold Coin (IGC). Under GDS, individuals, temples and
other institutions can deposit their gold at specified banks and
earn interest income on their idle gold holdings. The deposits
of physical gold in one’s Metal Account will be assessed on the
basis of purity and value, following which a fixed interest rate
within the range of 1%-3% is to be apportioned. The modus
operandi of the GMS can be presented from two perspectives
– Customer’s perspective and Bank’s perspective.
www.icmai.in August 2016
4.1. Modus Operandi from Customer’s Point of View:
u Purity Test Centres:
The households/ institutions will approach the Hallmarking
Centres (Purity Testing Centre for GMS) for certifying the purity of
the gold, where a preliminary XRF machine-test will be conducted
and the customer will be informed the approximate quantity of
pure gold. If the customer agrees, he will have to fill-up a KYC
form and give his consent for melting the gold. If the customer
does not agree to the XRF machine test, he can take his jewellery
back at this stage.
u Consent of customer:
If the customer agrees for melting the gold for conducting a
further test of purity, the gold ornament will then be melted, in
front of the customer, through a fire assay and its purity will be
ascertained. The results of the fire assay are told to the customer,
he has a choice of either refusing to accept, in which case he can
take back the melted gold in the form of gold bars, after paying
a nominal fee to that centre; or he may agree to deposit his gold
(in which case the fee will be paid by the bank). If the customer
agrees to deposit the gold, then he will be given a certificate by
the collection centre certifying the amount and purity of the
deposited gold.
u Opening of Gold Savings Account:
When the customer produces the certificate of gold deposited
at the Purity Testing Centre, the bank will in turn open a ‘Gold
Savings Account’ for the customer and credit the ‘quantity’ of
gold into the customer’s account. Simultaneously, the Purity
Verification Centre will also inform the bank about the deposit
made.
u Interest payment:
The bank will commit to paying an interest to the customer
which will be payable after 30/60 days of opening of the Gold
Savings Account. The amount of interest rate to be given is
proposed to be left to the banks to decide. Both principal and
interest to be paid to the depositors of gold will be ‘valued’ in gold.
u Redemption:
The customer will have the option of redemption either in cash
or in gold, which will have to be exercised in the beginning itself
(that is, at the time of making the deposit).
u Tenure:
Investors are offered following three types of deposits or
tenure options:
Short term tenure: Matures between 1-3 years
Medium term tenure: Matures between 5-7 years
Long term tenure: Matures between 12-15 years
u Tax Treatment: GMS is made tax free in order to boost
the sentiments of the investors. Therefore, investors are neither
required to pay any Income Tax on interest earned in gold account
nor have to pay any Capital Gain Tax on the appreciation in the
value of the gold deposited. It is also Wealth Tax free
l The Management Accountant 83
BANKING

4.2Modus Operandi from Banking Point of View flowchart below:

u Reserve Requirement:
Banks are required to maintain CRR/SLR on their Net Demand
and Time Liabilities (NDTL). CRR is to be maintained in the form of
cash with the RBI where as the SLR comprises of unencumbered
investments in approved securities, balance with other banks,
excess CRR, Cash with the bank itself and Gold. To incentivize
banks, it is proposed that they may be permitted to deposit the
mobilized gold as part of their CRR/SLR requirements with RBI.
u Foreign Currency:
Banks may sell the gold to generate foreign currency. The
foreign currency thus generated can then be used for onward
lending to exporters / importers.
u Coins:
Bank may convert mobilized gold into coins for onward sale to 5. Features of Sovereign Gold Bonds (SGB)
their customers. The second feature is the launch of SGB which intends to
u Exchanges: provide an alternate to purchasing physical gold. Functioning
Banks to buy and sell on domestic commodity exchanges, like a regular coupon bearing bond issued by the government,
where mobilized gold can be delivered. the investor lends money to the government and receives periodic
u Gold Loan to jewellers: fixed interest payments on it. The price of the bond will be based
Gold may be lent to jewellers as per the terms and conditions on the price of a fixed quantity of gold. On maturity or sale of
of the banks. When a gold loan is sanctioned, the jewellers will the bond, the holder will receive an amount equal to the value of
receive physical delivery of gold from the refiners. The banks the underlying amount of gold as on that date. The requirement
will, in turn, make the requisite entry in the jewellers’ Gold Loan for gold imports is made redundant through this mechanism
Account. as the entire transaction takes place in cash. The Bonds will be
u Interest charged by banks: issued in tranches. Each tranche will be kept open for a period
The interest rate charged by the banks will cover the to be notified. The issuance date will also be specified in the
Interest rate paid to the depositors of gold, fee paid to the notification. For example, applications are invited for the first
refiners and Purity Verification Centres, profit margin of the tranche from 5 – 20th November, 2015 and bonds will be issued
banks. on 26th November 2015. The essential features of the SGB are
The whole scheme can be schematically presented in the summarized in Table 1:

Table 1: Silent Features of the Sovereign Gold Bonds

Point of Feature
Eligibility of Investor
Tenure of Bond and exit
option
Denomination and
Maximum and Minimum
subscription
Particulars
The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts,
Universities, charitable institutions.
The tenure of the Bond will be for a period of 8 years with exit option from 5th year to be
exercised on the interest payment dates.
The bonds will be denominated in multiples of grams with the basic unit being one gram. The
minimum permissible investment will be 2 units or 2 grams of gold. The maximum amount
subscribed by an entity will be 500 grams of gold per fiscal. A self declaration will be obtained from
the party in this regard.

Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday)
Pricing Mechanism simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers
Association Ltd. (IBJA).

Payment for the Bonds will be through electronic funds transfer/cash payment/ cheque/ demand
Payment mode and
draft. Government of India Stock under GS Act, 2006. The investors will be issued a Stock/Holding
Issuance norm
Certificate. The Bonds are eligible for conversion into de-mat form.

84 The Management Accountant l August 2016 www.icmai.in

 Point of Feature Particulars

The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple
Redemption Price
average of closing price of gold of 999 purity published by IBJA.

The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually
Rate of Return
on the initial value of investment.

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961)
Taxability
and the capital gains tax shall also remain same as in the case of physical gold.

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary
Collateral Value
gold loan mandated by the Reserve Bank from time to time.

Tradability Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.

Source: RBI Press Release (2015)

6. Features of Indian Gold Coin (IGC)
IGC is a part of Indian Gold Monetization Scheme and ‘Make
in India’ initiative launched by the Government of India in
association with BIS, MMTC and World Gold Council (WGC).
The coin will be the first ever gold coin manufactured in India.
Until now, Indian consumers largely rely upon foreign gold coins
to address their needs, driving a significant amount of Indian
currency to foreign markets. The purpose of the measure is to
reduce the demand for coins minted outside India and ensure the
recycle of the gold available in the country. The IGC is unique in
many respects and will carry advanced anti-counterfeit features
and tampered-proof packaging that would allow easy recycling.
Apart from these, the IGC has the following features:
u IGC will have national emblem, Ashok Chakra, engraved in
one side and the face of Mahatma Gandhi on the other side. The
coins will be available in 5 and 10 gram denomination. A 20 gram
bar or bullion will also be available. The price for a 5 gm coin is
Rs.14,600, 10 gm is Rs 57,600 and 20 gm is Rs 28,900 excluding
VAT and other taxes.
u IGC will be of 24 carat purity and 999 fineness and coin will
be hallmarked as per BIS standard.
u Tampered-proof packaging along with advanced
anti-counterfeit features make the IGC very safe and easily
recyclable.
u The coins will be made available through the 18 designated
MMTC outlets. Later all banks will market these coins
perspective. The scheme offered two kinds of return – fixed
interest income on the gold deposit and capital gain, if any,
arising out of appreciation in gold price along with flexibility of
premature redemption. Both short term and long term investors
would not have to face any safety concerns because of the
provision of ‘Gold Reserve Fund’ to address the underlying price
and currency risk in the medium and long term as Government
would bear the risk of appreciation in price of gold at the time
of redemption of deposit. On the other hand commercial banks
would provide safety on the short term deposits. Moreover, the
scheme allows small amount of gold deposit (Minimum 30 grams)
and flexibility of tenure along with income tax and wealth tax
exemptions. On the supply side, the jewellers may get gold loan
from the bank. When a gold loan is sanctioned, the jewellers will
receive physical delivery of gold from the refiners. The scheme
also enables the Temples / Religious Trust to earn return on the
gold lying with them. If this gold comes out from the temples, it
will save a major chunk of Forex.
Thus the present scheme attempted to do away with the
limitations of the earlier version of GDS and as such looks
promising to deliver the objectives of the scheme in long term.
It is also true that GMS has worked well in Turkey where the
consumption of gold driven by the same sentiments as prevalent
in India. From that perspective, the scheme should have
tremendous prospect in India. But there are certain obstacles that
need to be understood in right perspective. These are:

7. Problems and Prospects of Gold Monetization 7.1 Strong Emotional Attachment of Indians towards Jewellery
Scheme The major obstacle before the scheme is to tackle the
The present GMS is more attractive as compared to the emotional attachment of Indians especially the Indian women
erstwhile GDS and investment in physical gold in terms of return towards Jewellery. Due to such strong emotional attachment

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BANKING

Presently India is the largest consumers and importer of gold which have great
significance for macroeconomic stability. Demand for gold in India is inelastic
because of its high resale value, demonstration effect, rising affluence of middle
class, Indian sentiments over the possession of gold jewellery, hedging tool against
inflation and safe haven for parking black money. Given this background, the
present paper primarily attempts to capture the Indian perspective with regard to
the gold policy since independence with major emphasis on recently launched Gold
Monetization Scheme and its components – Gold Deposit Scheme, Sovereign Gold
Bonds and Indian Gold Coins. The paper also touches upon the investment options
available w.r.t. gold along with problems and prospects of Gold Monetization
Scheme (GSM).

and wearing requirements of jewellery on the festive seasons/
social occasions, keeping the gold in jewellery form becomes the
necessity for almost in all Indian households. As gold has to be
stored in standardised under the scheme, households are unlikely
to participate in the scheme. According to World Gold Council
(WGC) 75% of gold imports of India is consumed in the form of
jewellery mainly in rural areas where people attach tremendous
sentimental value to gold jewellery. So, it is difficult and loss
making too (because of foregoing the making charge of jewellery
while melting besides other charges) for them to take part in the
scheme. Unless and until this myth of social status is broken the
desired output of the GMS will be very low. This is also apparent
from the fact that from 05 – 19th November 2015 only 400 gram
gold have been deposited under GMS (Statesman, 2015).
7.2 Gold Loan Products are a strong deterrent
Gold jewellery has collateral value in securing finance at the
time of need. There are specialized institutions (such as Muthoot
Finance, Manappuram, IIFL, etc), commercial banks and even the
moneylenders in unorganised sector who provide loans on the
basis of mortgage of jewellery. The advantage of such loan is that
the household can repay the money with interest and get back
the jewellery in its usual form (which has strong emotional value).
A prospective investor under the GMS would compare the loss
of making charge and other conversion charge with the interest
that has to be paid on gold loan obtained from these lenders. The
availability of such gold loans at competitive rate of interest and
the scope of retaining the jewellery in its usual form is one of the
major deterrents for the success of GMS.
7.3 Cost of Conversion is a deterrent
Apart from loss of making charges which is around 16% of the
gold value, gold jewellery will be tested for purity and melted
after obtaining the customers’ consent. The customer has to bear
various costs like fixed melting charges of Rs. 500 for a lot of up
to 100 grams and Rs.100 per additional lot of 100 grams, testing
charges of Rs. 300, stone removal charges of Rs 100 and melting
loss. This will not attract the target group both in terms of cost
and the modus operadi involved.
7.4 Legal Hassles relating to Black Money invested in Gold
If somebody deposit large quantity of gold whether that would
come under the purview of Income Tax or not is a big issue in India
as it is widely believed that the major chunk of gold investment
in India is financed through black money. Given the present
government move against black money, people are apprehensive
that they may be harassed by income tax authorities if they
deposit large quantity of gold. So long this apprehension persist,
the scheme is not likely to get the desired response. According
to experts, assurance must be given that customers shall not be
harassed by tax authorities on gold deposits. Certainly income tax
department may come into picture in case of very large deposits.
Till now tax on conversion of physical gold into gold deposit
schemes is imposed at 20% with indexation. It is recommended
that tax should be imposed only when gold is being sold.
7.5 Mismatch of Asset Liability Profile of banks in the long run
Although banks can deposit gold as a part of CRR/SLR
requirement, they are already holding government securities in
excess of what is required under SLR. Further customer has the
option to redeem the deposits in cash or gold which will increase
the risk mismatch of asset and liabilities for bank. If Jewellers
are allowed to repay gold loan in cash and bank is supposed to
pay interest in terms of gold, a problem may arise in near future
to manage asset and liability profile leaving scope for significant
mismatch.
7.6 Lack of Adequate and Reliable Infrastructure
Lack of infrastructure is another challenge before the success
of GMS. There are very few hallmarking centres and refiners that

86 The Management Accountant l August 2016 www.icmai.in

meet standards set by banks. There are four such refineries which
meet the parameters. Further there are 350 hallmarking centres
but more than half do not have melting facilities. Most of the tier
2 and 3 cities lack required infrastructure. Further the integrity of
the valuation process at the CPTC is very crucial.
8. Concluding Observations and Way Forward
It is true that the present GMS takes into account the
limitations of the 1999 Gold Deposit Scheme and try to remove
many of them, yet, the new scheme has to face several real and
emotional obstacles. It is most likely that the scheme may not
get the desired response neither from the households nor from
the institutions because of so many imperfections presents in the
infrastructure front, modus-operadi front, legal clarity front. The
successful implementation of GMS in India demands the creation
or presence of the following elements:
u Transparent and efficient gold valuation mechanism;
u Modern and efficient gold storage and logistic support;
u Development of environment of faith and trust in gold
related transactions;
u The issue of black money and gold need to be resolved;
u Establishment of Gold Exchange and Gold Board;
u End to end customised enterprise resource planning;
u Adoption and pursuance of aggressive promotional strategy
to remove the myth.
In fine, one can say that all the three components of GMS –
GDA, SGB and IGC are progressive measures introduced by the
Government of India in order to increase the supply of gold in
the economy, curtail CAD and unlock the value hidden in gold.
But the scheme faces its biggest challenge from the emotional
attachment and psyche of Indian masses towards the possession
of gold ornaments. The situation is further worsened in the
presence of the alternatives available in the form of gold loan
both from organised sector and unorganized moneylenders.
Viewing from that perspective, the scheme may not attain due
success at least in the short run. The long run prospect of the
scheme depends on several factors as mentioned above. The most
notable amongst them is to consider GMS as forward looking
policy and as such devote time and resource for its promotion
so as to create a culture of investment in paper gold in the
minds of Indian masses. MA
References
Published Articles and Report:
1. Alexander, C. (2015), Gold Supply and Demand Statistics
for 2015/2016: What is the Message? GFMS Gold Survey,
GFMS Thomas Reuters, 15th June.
2. D’souza, E. (2015), Gold Monetization Scheme for India,
Economic and Political Weekly, Vol. 21, No. 12, March.
3. Goel, A. (2015), Gold Monetization Scheme, Global
www.icmai.in
Journal of Multidisciplinary Studies, Vol.4, Issue 8, July.
4. HDFC Securities (2015), Gold ETF and Gold FOF: A
Perspective, Retail Research, June 17.
5. Ministry of Finance, Government of India, (2015),
Introduction of Gold Monetization Scheme, Office
Memorandum, Department of Economic Affairs
(Investment Division), 15 September
6. RBI (2015), Sovereign Gold Bonds 2015-16, Press Release,
30th October.
7. Saravanan, P., Srikanth, M. and Avabruth, M. (2015), Gold
Monetization Scheme, Economic and Political Weekly, Vol.
L, No. 45, November.
8. Soundararajan, N., Goswami, A., Bhatia, C., Jakhade,
J., Bagrawat, S., (2014), Why India Needs a Gold Policy,
FICCI- World Gold Council Report, December
9. Statesman (2015), Poor Response to Centre’s Gold
Monetisation Scheme, November 20.
10. Singh, C., Sinha, A.K., Nandkarni, A., Kumar, A., Sardar,
J.K., Jain, S., Das, S., Agrawal, S., Shukla, S., (2015), Gold
and India, IIMB-Working Paper No. 482, IIM Bangalore,
February.
11. Online Resources:
12. http://www.business-standard.com/budget/article/gold-
monetisation-may-curb-imports-115022801361_1.html
13. http://businesstoday.intoday.in/story/union-budget-
govt-announced-slew-of-schemes-to-monetise-gold-
holdings/1/217451.html
14. Turkey: Gold in Action, Downloadable at http://www.gold.
org/supply-and-demand/turkey-gold-in-action
15. h tt p : / / w w w . l i v e m i n t . c o m / M o n e y /
DQ4W0svnSUUzmNP53KbeaO/Stumbling-blocks-for-
Indias-gold-monetization-scheme.html
16. http://www.nitinbhatia.in/views/5-benefits-of-gold-
monetization-scheme/http://www.businesstoday.in/
markets/commodities/gold-monetisation-scheme-will-
benefit-you/story/219566.html (22.5.2015)
ramagoutambhowmik@gmail.com
August 2016 l The Management Accountant 87
CASE STUDY

Reduction in
Sugar
Conversion Cost

Dilip S. Patil
Finance Manager
Padmabhushan Krantiveer
Dr. Nagnathanna Nayakawadi
Hutatma Kisan Ahir S.S.K. Ltd., Walava

“Reduction in sugar conversion cost is need of time in uncertainty of situation. The

paper is based on how to reduce the conversion cost in sugar to survive in odd time,
the overall financial management of sugar industry and how to earn profit even after
making more expenditure. This Paper is focusing on formula method of analyzing
income and expenditure by making comparative study.”

T
he cost data of a sugar factory consists of the
material cost, conversion cost and the overheads.
While cost control measures are being attempted
to by setting standard / norms, the sugar factory
very rarely employs the cost reduction methods by
challenging and improving upon the standard / norm.As sugar
industry is a seasonal industry, the best way of effecting cost
reduction is to set the standard / norm for the season and
improve the actual with the norm, analyse the variance and
adopt corrective measure to get rid of negative variances.
The physical parameter and the components of cost of a
sugar industry and the cost control measures which will
automatically reduce the cost of production of sugar as given
below.
Conversion cost
a. Fuel oil and Lubricants – By following preventive
maintenance consumption can be reduced.
b. Power – Power must be used whenever necessity arises.
Switching off the motors, pumps when not in use.

88 The Management Accountant l August 2016 www.icmai.in

 Modernizing the boiler, co-generation of power.
c. Packaging materials - Correct use of Gunny /PP bags.
d. Repairs and maintenance – By preventive maintenance,
quality spares and technical modifications.
e. Steam production – Bagasse consumption, Firewood,
Steam economy, Exhaust utilization.
f. Miscellaneous – Cost reduction in purchase, cost reduction
in sugar selling, Inventories.
Financial Management
In every industry there is a special importance to financial
management. The industry or society is evaluated on its
Profitability. While evaluating the sugar factory overall working
management, we must have considered factors such as, crushing
capacity, cane crushed, sugar production, and recovery obtained
and sugarcane price paid. To manage all above things, special
attention must be given on planning, co-ordination, motivation,
and cost control. When we talk about financial management our
main focus should be on cost control, cost reduction and income
generation.
Essential Things In Effective Financial Management
1. Planning
a. Short term financial planning
b. Long term financial planning
2. Motivation and Coordination
3. Comparison and Comparative Study
a. Cost control
b. Cost analysis
c. Cost comparison
1. Comparison with last year’s expenditure
2. Inter firm comparison
3. Comparison with budget
4. Comparison with standard cost
4. Effective control
a. Effective Financial Audit
b. Effective Cost Audit
c. Effective Management Audit
d. Technical Efficiency Audit
e. Fix Standards
f. Assess Technical loss in rupee
g. Statistical analysis
h. Use of modern techniques like Computerization,
Automation to avoid human errors, increase efficiency.
i. By using modern technology to bring down losses to zero
level.
5. Effective Recovery Cell: Create separate recovery cell.
6. Raise Funds at Low Rate/Without Interest
1. Raise Capital
a. By Selling Additional Shares
www.icmai.in August 2016
b. By Increasing Face Value of Share.
c. By Making Beneficiary and Active Members.
2. Raise Deposits/Loans
a. Deduct Pre-seasonal Expenditure Deposit
b. Deduct Modernization and Expansion Deposit
c. Raise H&T Loan at lower rate
d. Raise FCNR(B) Loan from Nationalized Bank by converting
existing Term Loan
e. Find out New Sources of Low Rate Funding
7. Related with Labours & Workers
a. Motivate Workers to increase their Efficiency & Quality
of work
b. Inter Departmental training and training from outside
agency
c. Consult experts to update advance technology
d. Maintain strict discipline to avoid misbehavior
e. Implement Effective Work Procedure
8. Discipline
a. Avoid penal actions by timely paying Installments and
Government dues.
b. Update your knowledge about changes in Govt. Policies,
Rules & modern techniques.
9. Effective Marketing
Marketing department must have to work hard to get better
rates for the finished product of a sugar mill and must
update their knowledge of local & International market for
grabbing the opportunity available in the market. They have
to find out new techniques of marketing and also they have
to form separate sales department in the factory. Marketing
department should promote, motivate and appreciate the
person who helps to increase the benefit of factory.
10. Cost Control
To control the expenditure first you have to classify the
expenditure into fixed cost & variable cost.
Variable cost: The expenditure related to per ton of crushing/
per quintal of production should minimize. In short, the
expenditure changes with the level of activity/production should
minimize.
Fixed cost: The total cost after deducting variable cost should
minimize i.e the expenditure incurred even though the production
is undertaken or not.
It is not possible to accept an advice given by anyone i.e
to reduce expenditure; instead we can analyze the factory
expenditure. To analyze expenditure is the best technique for
cost control. If we have not analyzed the expenditure then we
will not able to understand whether our expenditure is increasing
or decreasing. For analyzing expenditure you have to compare the
current year expenditure with the last year expenditure of your
own mill and also with the other sugar mills having good financial
management. The specimen is given asww:
l The Management Accountant 89
CASE STUDY

Intra Firm Comparison

Intra firm comparison means comparing the figures of income and expenditures of current year with last year figures. By this
comparison we shall come to know the current year’s income & expenditure is more or less and what are the exact reasons of variance.
Detail analysis of Income and Expenditure pertaining to the year 2011-12 & 2012-13 of “X” Sugar Mill is given below.

Income & Expenditure (Per MT. of cane) for the year 2011-12 and 2012-13
   
2012-13 2011-12

A) Particulars Income Rs. PMT. Increase Decrease

Cane Crushed in M.T. 758665.540 832982.899 74317.369
1 Production Value of sugar 3591.73 2694.75 896.98 0.00
2 Co- Product Value 207.53 380.65 0.00 173.12
3 Distillery Income 10.86 79.2 0.00 68.34
4 Co-gen Income 39.31 -33.96 73.27 0.00
5 Solar Power Income 4.10 -6.07 10.17 0.00
6 Other Income 33.11 21.78 11.33 0.00
Total Income. 3886.64 3136.35 991.75 241.46
B) Variable cost Rs.PMT.
1 Cane Cost 2344.29 2039.42 304.87 0.00
2 H & T Expdr. 485.39 440.15 45.24 0.00
3 Machinery Repairs & Main. 62.65 68.57 0.00 5.92
4 Process Chemical Expdr. 24.22 24.22 0.00 0.00
5 Packing Expdr. 40.05 53.09 0.00 13.04
6 Electrical Expdr. 15.64 147.15 0.00 131.51
7 Production Overheads 41.02 24.91 16.11 0.00
8 Salary & Wages (20%) 17.30 15.45 1.85 0.00
9 Interest on working Capital 135.74 102.04 33.70 0.00
Total Variable Cost 3166.31 2915.00 401.78 150.47

C) Contribution Per M.T.( A-B) 720.33 221.35    

 D) Fixed Cost Rs. In Lakh.

1 Administrative Cost. 1365.90 821.22 544.68 0

2 Interest on Term Loan 205.75 29.61 176.14 0

3 Salary & Wages (80%) 524.90 514.7 10.20 0

4 Depreciation 668.34 452.80 215.54 0

Total Fixed Cost 2764.89 1818.33 946.56 0

E) Total Contribution (C x Current
5464.92 1843.81
years crushing of “X” Sugar Mill)  
F) Net Profit ( E – D ) Rs. in Lakh 2700.02 25.48
* Data Source: Annual report published by respective sugar mill

90 The Management Accountant l August 2016 www.icmai.in

 Variance Analysis (Rs. In Lakh)

Favourable Adverse
Sr.No Particulars Formula
Variances Variances

Increase in sugar production PMT Sugar Production value x Current year’s

1 6805.08
value crushing 896.98 x 758665.540
Decrease in Co- product
2 1313.40 Diff. in income x Current year crushing
Income
3 Decrease in Distillery Income 518.47 Diff. in income x Current year crushing

4 Increase in Co-gen. Income 555.87 Diff. in income x Current year crushing

5 Increase in Other income 85.96 Diff. in income x Current year crushing

6 Increase in Solar income 77.16 Diff. in income x Current year crushing

Diff. in Cane Price x Current year crushing
7 Increase in cane cost 2312.94
Diff. in Expdr. x Current year crushing
8 Increase in H & T Expdr. 343.22
Decrease in Machinery repairs Diff. in Expdr. x Current year crushing
9 44.91
and maintenance
Diff. in Expdr. x Current year crushing
10 Decrease in Packing Expdr. 98.93
Diff. in Expdr. x Current year crushing
11 Decrease in power cost 997.72
Diff. in Expdr. x Current year crushing
12 Increase in Mfg. overheads 0.00 122.22
Increase in Salary & wages Diff. in Expdr. x Current year crushing
13 14.04
(20%)
Increase in Interest on Diff. in Expdr. x Current year crushing
14 255.67
working capital
Loss due to less crushing
Less crushing – 74317.37 M.T. x Last year’s
15 (Reduced crushing 74317.37 164.52
contribution
M.T)

16 Decrease in fixed cost 946.56 Decrease in fixed cost

Total 8665.63 5991.05  

(+) Last year profit 25.44  

(-) Adverse variances 5991.05  

Current year’s profit 2700.02  

Inter Firm Comparison

Inter firm comparison means comparing the Income & Exp. of two different factories to realize where we are actually stood as
compare to other sugar mill. By this comparison we shall come to know the mills income & expenditure is more or less and what
are the exact reasons of variance. Detail analysis of Income and Expenditure pertaining to the year 2012-13 of “X” Sugar Mill with

www.icmai.in August 2016 l The Management Accountant 91

CASE STUDY

reference to “Y” Sugar Mill is given below.

Comparison of PMT. Income & Expenditure Between “X” Sugar Mill & “Y” Sugar Mill for the year 2012-13

Income ( Rs. PMT.)

A) Particulars “X” Sugar Mill “Y” Sugar Mill Increase Decrease

1 Cane Cost 2344.29 2703.22 358.92 0.00

2 H & T Expdr. 485.39 567.77 82.38 0.00

3 Machinery Repairs & Main. 62.65 55.03 0.00 7.62

4 Process Chemical Expdr. 24.22 39.62 15.40 0.00

5 Packing Expdr. 40.05 53.74 13.69 0.00

6 Electrical Expdr. 15.64 0.00 0.00 15.64

7 Production Overheads 41.02 148.76 107.73 0.00

8 Salary & Wages (20%) 17.30 57.30 40.00 0.00

9 Interest on working Capital 135.74 160.19 24.45 0.00

Total Variable Cost 3166.31 3785.62 642.58 23.27

C) Contribution Per M.T. (A-B) 720.33 715.89    

  Fixed Cost Rs. In Lakh.

1 Administrative Cost. 1365.90 541.24 0.00 824.66

2 Interest on Term Loan 205.75 0.00 0.00 205.75

D)
3 Salary & Wages (80%) 524.90 1651.57 1126.66 0.00

4 Depreciation 668.34 1339.21 670.87 0.00

5 Share Redemption Funds 0.00 1537.03 1537.03 0.00

Total Fixed Cost 2764.89 5069.05 3334.56 1030.41

Total Contribution (C x Current years
E) 5464.92 5158.99    
crushing of “X” Sugar Mill)

F) Net Profit ( E – D ) Rs. in Lakh 2700.02 89.94    

Variance Analysis (Rs. In Lakh)

Favourable Adverse
Sr.No Particulars Formula
Variances Variances

1 Increase in Co- product income 12.21 Diff. in Income x crushing of “X” Sugar Mill

2 Decrease in Distillery Income 1227.44 Diff. in Income x crushing of “X” Sugar Mill

3 Increase in Co-gen. Income 115.39 Diff. in Income x crushing of “X” Sugar Mill

92 The Management Accountant l August 2016 www.icmai.in

 Favourable Adverse
Sr.No Particulars Formula
Variances Variances

4 Decrease in other income 393.14 Diff. in Income x crushing of “X” Sugar Mill

5 Increase in Solar income 31.11 Diff. in Income x crushing of “X” Sugar Mill

6 Decrease in cane cost 2723.00 Diff. in Income x crushing of “X” Sugar Mill

7 Decrease in H & T Expdr. 624.99 Diff. in Income x crushing of “X” Sugar Mill
Increase in Machinery repairs
8 57.81 Diff. in Income x crushing of “X” Sugar Mill
and maintenance
9 Decrease in process chemical 116.83 Diff. in Income x crushing of “X” Sugar Mill

10 Decrease in Packing Expdr. 103.86 Diff. in Income x crushing of “X” Sugar Mill

11 Increase in power cost 118.64 Diff. in Income x crushing of “X” Sugar Mill

12 Decrease in Mfg. over head 817.39 Diff. in Income x crushing of “X” Sugar Mill
Decrease in Salary & wages
13 303.47 Diff. in Income x crushing of “X” Sugar Mill
(20%)
Decrease in Interest on working
14 185.49 Diff. in Income x crushing of “X” Sugar Mill
capital
Profit due to Excess crushing
Increased crushing 38025.54 MT x contribution of
15 (Increase in crushing 38025.54 272.22
“Y” Sugar Mill
M.T)
Decrease in sugar production
16 3203.01 Diff.in Income x Rate of “Y” Sugar Mill
value
17 Increase in fixed cost 2304.15 Increase in fixed cost

Total 7610.12 5000.04

(+) Last year profit 89.94

(-) Adverse variances 5000.04

Current year’s profit 2700.02

Sometime we need not to see how many lakh we have spent, but what is per metric ton of expenditure is more important and in
case of packing expenditure how much per bag expenditure incurred is important. If we are going to compare the financial results of
two sugar mills, both the sugar mills must have follow uniform accounting systems.
The comparison of per metric ton of expenditure is related to variable expenditure and in case of fixed cost comparison must do
with how much rupees spent in Lac. While comparing the expenditure with standard cost the same method to be follow. Sometimes
we spent a lot, but later we come to know that there is no profit, in that case we have to think about cost benefit ratio. As we are
discussing about cost control, so again I have to mention here to reduce cost, to compare the income and expenditure with last year
figures, other sugar mills figures and compare with standard cost. We think that things may go as per budget prepared by us but all
the time it does not happen hence our budget must be flexible.

www.icmai.in August 2016 l The Management Accountant 93

CASE STUDY

How to Increase Profit by increasing Expenditure Then what will be general assumption? Expenditure of Rs.1600
Let’s take an example. Here some imaginary figures of per plus Rs.100 per ton additional expenditure on H&T total of
metric ton expenditure have been taken to understand how we expenditure is Rs.1700 PMT. It means our income is less by Rs.100
will gain profit by increasing expenditure. PMT. Now we calculate the income & expenditure if we crush 5
Lac MT of sugarcane instead of 4 Lakh MT.
PMT
Variable Cost (Rs. PMT) SR
PARTICULARS EXPDR. x Rs. Lakh
NO.
Crushing
1 Cane Cost 1000.00
1 Variable expenditure 1400 x 4 5600
2 H & T Cost 160.00 Variable cost for
2 additional 1 Lakh 1500 x 1 1500
3 Machinery R & M Expenses 50.00 crushing
If we divide fixed cost
4 Process Chemical Expenses 15.00 by 5 then the PMT fixed
3 cost will come down from 160 x 5 800
5 Packing Expenses 40.00 200 PMT to...

4 Total Expenditure 1580 x 5 7900

6 Factory Overheads
7 Interest on working capital
Total Variable Expenditure
Fixed Cost
1 ´Salary & Wages
2 Interest on term loan
3 Administrative cost
4 Depreciation
Total Fixed Cost
35.00
5 Total Income 1600 x 5 8000
100.00
6 Net Profit 20 x 5 100
1400.00 It means the situation on crushing of 4 Lac MT is of no profit
no loss has been changed though the PMT variable cost increased
and we have earned additional income of Rs.1 Cr. How this
happened? It means we have incurred expenditure on additional 1
200.00 Lac MT of sugarcane brought from gate-cane. How much increase
in the harvesting & transportation cost? Let’s see 4 x160=640 (+)
100.00
1x260=260 Total expenditure Rs.900 Lac / 5 Lac MT of crushing
means actually how much harvesting & transport cost is increased
300.00
? It is only Rs.20 PMT. How turned into profit? The fixed cost is
come down from Rs.200 PMT to Rs.160 PMT. This shows that due to
200.00
additional crushing the burden of fixed cost come down. So though
800.00 the variable cost increased we have earned profit.

Total PMT Expenditure Considering 4 Budegtory Control

1600.00
Lakh MT Crushing
Earlier we have discussed that, reduction in variable cost is in
PMT & fixed cost in rupees. We shall understand that, as crushing
increases, the PMT expenditure of fixed cost comes down & if
crushing decreases this ratio will increase.
Now we shall have discussion on a different idea, which is how
one can gain more profit by increasing expenses. Now let’s have
an example. We are bringing sugar cane from gate-cane for our
crushing. But the situation is like this, we have to crush 4 Lakh
MT of sugarcane & our production cost is Rs.1600 PMT & the
production value is also Rs.1600 PMT. It means we are in the
stage of no profit no loss (BEP position)
Suppose we are going to crush additional 1 Lakh MT of
sugarcane from gate-cane. The average harvesting & transporting
expenses for this additional 1 Lakh MT is more by Rs.100 PMT.
As per the provisions of by-laws and Maharashtra state
co-operative societies Act all co-operative sugar factories in
Maharashtra prepares their Annual Budget and get sanctioned from
AGM. Most of the times it happens that expenditures shown in
budget are already incurred. As new provisions in Act it is obligatory
to conduct the AGM on or before 30th September. But generally
most of the annual general meetings are held by sugar factories
during the month of August and September. In these meeting the
mills should put forth the budget of current year and the coming
year also. It is obligatory or compulsory to spend as per budget, and
then automatically there will be restrictions on spending without
planning and provision.
Standard Cost
Standard cost mean assumed or budgetary cost to be incurred

94 The Management Accountant l August 2016 www.icmai.in

on production or Standard cost formula fixed by Govt. or by a Though if we want to decide standard cost on sugar mill level,
sugar factory on the comparative study of expenses incurred we have to consider the following things. Every year Vasantdada
and market scenario of raw and finished goods with better Sugar Institute (VSI) publishes a detailed comparative data factory
financial unit. Standard Cost is related to expenditure incurred on wise expenditure incurred on particular head. I think based on the
particular account head by the sugar mills of same capacity in same said data we can derive our own standard cost by using following
geographical region. Some years back Hon. Commissioner of sugar formula.
had fixed standard cost to all the sugar factories which is given Mean - Means average of expenditure
below. Median – Middle of maximum and minimum
1. Power Cost Rs. 16/- PMT Mode- The number which appears most often in a set of numbers.
2. Process Chemical Expdr. Rs. 24/- PMT I will suggest deriving standard cost we must take the option of
3. Repairs and Maintenance Rs. 20/- PMT median from above sugar factories which is having same capacity
4. Packing Expdr. Rs. 30/- PMT and same geographical region.
When we think about how derive standard cost? There is no Let’s see example of standard cost based on the figures of
define equation or guidelines from any competent authority. expenditure published in VSI booklet, their capacity and age.

Year 2012-13 (Rs.PMT )

Name of the sugar Repairs and Process Factory Salary &

Sr. No. Packing Power
Factory Maintenance Chemical over head wages

1 Jawahar SSK 88.86 27.78 51.30 110.08 229.26 7.89

2 Sharad SSK 105.92 23.88 38.99 131.42 300.06 0.00

3 S. M. Kagal SSK 94.39 38.43 78.28 122.22 274.03 16.22

4 Kranti SSK 73.48 43.40 46.40 95.41 171.26 12.07

5 Sonhira SSK 70.66 29.90 69.02 135.27 200.75 9.95

  Mean 86.66 32.68 56.80 118.88 235.07 9.23

  Mode* 0.00 0.00 0.00 0.00 0.00 0.00

  Median 88.86 29.90 51.30 122.22 229.26 9.95

*There is no number which appears most often in an above numbers ** Data source: Booklet published by VSI

Standard For Store Consumption
While considering standard cost we must not only think about
how much rupee spent but also think about how much store used
for production of sugar and for repairs. How we can derive standard
use of process chemical, oil grease, lime etc. to avoid unnecessary
expenditure? It is good to collect data published in RT(8) C of other
sugar factories of same capacity and then compare the same with
use of Lime, Sulphur, Phosphoric acid, Washing soda, Caustic soda,
antiscalant, flocculants, Biocides, viscosity reducer, oil and grease
etc of our factory. After comparing the use of store we ourselves
may set standard of store consumption.
Technical Standards
Indian sugar industry has its efficiency standards. We should
have think about technical performance audit to achieve standard
technical efficiency parameters. When we talk about technical
parameters like Reduced Mill extraction, Reduced Boiling House
Extraction, the ratio of hours lost with hours available etc. it should
also correlate in terms of rupee. MA
Acknowledgement
I take opportunity to express my sincere gratitude to Hon. Shri
Vaibhavkaka Nayakawadi, Chairman, Padmabhushan Krantiveer
Dr. Nagnathanna Nayakawadi Hutatma Kisan Ahir S.S.K. Ltd.,
Nagnathanna Nagar, Walve, Tq. Walava, and Dist. Sangli for allowing
me to prepare this paper on “Reduction in Sugar Conversion Cost”.
I would also like to thank Shri N. L. Kapadnis, Managing Director
for his guidance for preparing this paper.
dilip.patil4@gmail.com

www.icmai.in August 2016 l The Management Accountant 95

TAXATION

GST:
A Perceptual Study among the Tax
Professionals

Sumit Kumar Maji

Assistant Professor Subrata Giri
University of Burdwan University of Burdwan
Burdwan Burdwan

96 The Management Accountant l August 2016 www.icmai.in

 A
lthough the majority of the people in India wait
eagerly for the Direct Tax reforms in each and
every financial budget, it is the indirect taxes
which are the major sources of finance to the
Central Exchequer. On an average out of the
total tax revenue (Centre Government and
State Government combined) the contribution of the direct taxes
to total tax revenue is approximately 26.55% and the proportion
of indirect taxes to total tax is around 73.46% since 1980s1. Since
the indirect taxation is the prime source of tax revenue it must
be effectively implemented and reformed from time to time to
finance the public expenditures. One such major Indirect Tax
Reform would be the implementation of Goods and Services Tax
(GST) in India. It is a much awaited Indirect Tax revolution to
foster the economic growth in India. Perhaps it is one of the most
logical and pragmatic steps that can be taken at this juncture of
the economy to rationalize the indirect taxation in India (Iqbal,
2016). The need to implement the GST in India can be traced
back to the recommendation of the harmonised tax regime by the
Dr. Raja J Chelliah Committee in 1992. GST is an integrated and
comprehensive indirect tax on the production/ delivery of goods
and services and the sale and purchase of the same. Because
of the existence of the fiscal federalism among the Centre and
State in India complete elimination of the cascading effect of tax
could never be done, say for example the Central Sales Tax is not
allowed as credit from the State level Value Added Tax. As a result
of that the cost of the products and services goes up fuelling the
inflation and also makes our goods and service less competitive in
the international market. Thus need of the hour is to have a single
indirect tax system which will be applicable to goods and services.
GST is the answer to this pressing question. In the GST regime
a single indirect tax will prevail, which will subsume almost all
the existing indirect taxes such as excise, customs, VAT, CST etc.
and therefore irrespective of the manufacture, delivery, sale or
purchase of goods and services GST will be charged and the input
GST which has already been paid will be allowed as deduction
creating an era of no cascading effect of tax. One of the most
interesting feature of the GST is that it does not discriminates
between goods and services unlike the present indirect tax
structure where on the manufacture of goods, excise is charged
while on sale and purchase VAT or CST is levied whereas the
provision of service only attracts service tax (Bhowmick, 2016).
In Indian context in order to maintain the very essence of the
federal structure between the Centre and State the GST will be
levied by both the Centre and the State which will comprise of
Central GST, State GST and Integrated GST.
A number of studies have been conducted in India and
abroad elaborating, conceptualizing, discussing and debating
the nature of GST, its framework, applicability, methodologies,
www.icmai.in August 2016
implementation issues, effect on the economy etc. Some of the
notable studies on GST are conducted by Chrisholm et al. (1990),
Ruggeri & Bluck (1990), Pope (2001), Valadkhani (2005), Dickson
& White (2008), Vasanthagopal (2011), Garg (2014), Bhowmick
(2016). In a different line, Ishak et al. (2015) studied the
perception of the students towards the newly implemented GST
in the context of Malaysia which revealed that majority of the
students opined that the GST was implemented in their country
in a wrong way. However there is a scanty of literature which has
tried to enquire into the opinion of the tax professionals about the
GST to be implemented in India. Since it will be implemented in
India in recent time thus it is pertinent to assess the preparedness
among the tax professionals about the GST, the perception of
the tax professional about the impact of the GST in India and the
reasons of non implementation of GST so far in India.
Objectives of the Study
The current study is undertaken with the following objectives:
1. To explore the level of GST literacy among the tax
professionals to gauge the preparedness of the tax
professionals.
2. To evaluate the implications of the GST on Indian Economy.
3. To identify the reasons of non-implementation of GST in
India in the opinion of the tax professionals in India
Data & Research Methodology
The present study is predominantly analytical in nature. For the
purpose of the study a structured questionnaire was developed.
For the purpose of this study the tax professional such as CAs,
ICMAs, and Tax Lawyers Practising in Asansol, Burdwan and
Bolpur City of West Bengal, India were selected for the purpose
of the study. Using a snowball sampling technique a total
questionnaire of 50 sets (Asansol-16 sets, Burdwan-20 sets and
Bolpur-14 sets) was served. Out of those 50 sets 34 (26 Male and
8 Female) i.e. 68% responses were finally collected for proceeding
to the next step of analysis. The period of survey was from 1st
may to 25th may 2016. For the purpose of this study there was an
attempt to determine the GST literacy among the respondents. For
the purpose of this 10 general questions about the awareness of
GST were included in the questionnaire which was collected from
the ‘Frequently Asked Questions’ present on the official website
of the Ministry of Finance, Government of India. Apart from this
the questionnaire was designed in such a way so as to assess
the perception, impact on the economy and the reasons of non-
implementation the GST among the respondents, The primary
data so collected has been analyzed by using simple statistical
techniques such as frequency distribution, charts, measures of
central tendency, measures of central dispersion to achieve the
objectives of the study.
l The Management Accountant 97
TA X AT I O N

Analysis and Findings

Chart 1: GST Literacy

Source: Author’s own calculation based on primary data.

From Chart 1 it can be seen that out of the total, 35% respondents scored in between 31% to 60%, 76% respondents scored in
between 61% to 90% and approximately 6% had scored more than 90%. Thus it can be said that there is a sufficient degree of GST
literacy among the tax professionals surveyed for the purpose of the study and they are well prepared for the introduction of the GST.

Table 1: Perception about GST

Sl. No. Statements Mean SD

1 GST system is not as good as VAT/CST system. 2.7353 1.3328

2 There is no difference between VAT & GST. 1.8823 0.8795

3 The revenue share of the state Govt will reduce due to the implementation of GST. 3.0294 1.1673

4 I think business community want GST to be implemented in India as soon as possible. 4.0294 0.9688

5 It is very difficult to implement GST in India. 3.5588 0.9274

6 GST if implemented should have a uniform (single) rate of tax. 3.7352 1.0818

7 GST rate should be very low. 2.7059 0.7988

Source: Author’s own calculation based on primary data.

In Table 1 an effort was made to evaluate the perception of the tax professionals studied for this purpose. The analysis of the
statements clearly suggest that majority of the respondents have agreed that GST system is different and better from the existing
indirect tax mechanism in operation. But they opined that there exists a lack of awareness about how the GST system will work. It
is also evident from the analysis of Table 1, that the majority of the respondents believe that most of the business houses in India
want GST to be implemented as soon as possible but with an apprehension that implementing GST in India would be a tedious task
for the current Government because of various reasons pointed out elaborately in Table 3. Majority of the respondents also opined
that GST rate should be a uniform and rational one (not very low) so that the Government has adequate funds to finance the public
expenditures. However the respondents remained neutral in their opinion regarding the fact that whether the State Governments will
loose the revenue due to the implementation of GST in India.

98 The Management Accountant l August 2016 www.icmai.in

 Table 2: Impact of GST

Sl. No. Statements Mean SD

1 GST will increase the inflation rate. 3.2059 1.0668

2 GST will help to reduce leakage/black money problem in India. 3.0882 1.2152

3 GST will positively affect the Economic growth of India. 4.0294 0.7171

4 GST implementation will boost the share/stock market. 3.9090 0.7650

5 FII & FDI will increase if GST is implemented in India. 3.3823 0.9216

Source: Author’s own calculation based on primary data.

Table 2 analyzes the opinions received from the respondents regarding the possible implications of the GST on the Indian economy.
Majority of the respondents remained neutral (Mean value close to 3) on the points whether the GST will increase the inflationary
situation in our country and whether the GST system is concrete enough to reduce the tax leakage and creation of black money in the
economy. As far as the effect of the GST in India is concerned most of the tax professionals agreed or strongly agreed on the points
that effective implementation of the GST in India will have significant positive impact on the foreign fund flow in the form of FDI and
FII in India which in turn will have notable favourable implications towards the Indian stock markets. Thus on an overall basis it can
be concluded that most of the respondents believed that introduction and effective implementation of GST will usher a new dawn of
economic growth and development in India.

Table 3: Reasons of Non-implementation of GST in India

Sl. No. Statements Mean Rank SD

1 Big Business houses in India, do not want GST to be implemented in India. 2.4709 4 0.8252

Consecutive Central Governments failed to convince the opposition party

2 4.0882 1 0.6682
and the states to pass the GST bill.

3 GST is not implemented because it is definitely a complex system. 2.8235 3 1.1927

Different State Govt are reluctant to implement GST in the fear of loss of
4 3.8823 2 0.9459
share of tax revenue.

Source: Author’s own calculation based on primary data.

In Table 3 a modest effort was made to assess the important reasons of the non-implementation of the GST in India so far. The
respondents have agreed (as evidenced from Table 2) that implementation of GST in India is difficult although now it seems that the
road block is getting cleared gradually. The respondents have agreed that GST is not all a complex system and since it is beneficial to
the economy the business community want the GST to be implemented at the earliest. Majority of the respondents have agreed that
the GST has not been implemented in India mainly because of the failure of the earlier and the present Government to convince the
political party more specifically the political unwillingness of the parties sitting at the opposition. Another prime reason accepted by
the respondents that the different State Government are not satisfied about the share of tax revenue and they believe that the fiscal
federalism will be affected due to the implementation of GST in India.

www.icmai.in August 2016 l The Management Accountant 99

TA X AT I O N
Chart 2: Opinion about the GST Rate:
The study also tried to obtain the opinion
of the tax practioners regarding the rational
uniform rate of GST. 50% of the respondents
have proposed that the rate of GST should
be within the range of 16% to 20%, 29% of
the respondents argued that the rate of GST
should be between 10% and 15% whereas
9% of the respondents suggested that the
rate should be little higher i.e. more than
20%. Another 9% respondents wanted the
GST rate to be very low at 1% to 9%.
Conclusions
The introduction of GST in the country
will bring about multiple benefits to all the
stakeholders. The opinion study revealed
that GST is a better indirect taxation
system which will in no way going to affect
the revenue share of the States and most
of the business houses wants GST o be
implemented as soon as possible. The
respondents have opined strongly that GST
implementation will have multiple benefits
to our economy by positively affecting the
economic growth, share market. But in most
of the occasions the respondents felt that
implementation of GST is difficult in India
due to the political unwillingness of the
opposition parties and the failure of the
past and present Government to take the
opposition in to confidence. Citizens of the
country would be getting benefit of lower
end price of all goods & services and finally
100 The Management Accountant
Source: Author’s own calculation based on primary data.
Indian goods & services would be most
competitive in the international market
which will contribute to the growth of
Indian Economy. GST regime will definitely
help in providing a common national market
in India. GST is not a new concept in the
world. In 1954 France for the very first time
introduced GST in their economy and since
then 160 countries of the world have GST.
India (Venkat, 2016). It is a great lacuna
on the part of this country that till to date
we have not been able to implement GST
in our country. The mechanism of GST
will overcome all these problems as there
will uniform structure all over India in the
new tax regime which will also help India
to improve its rank in the ‘Ease of Doing
Business’ race. MA
References:
Bhowmik, G. (2016). Goods and Services
Tax (GST) in India: Prospects and the Road
Ahead. The MA Journal, 51(4), 19-26.
Chelliah Committee. (1992). Tax Reforms
Committee: Interim and Final Reports.
Chrisholm, A., Freebairn, J., & Porter, M.
(1990). Goods and Services Tax for Australia,
A. Austl. Tax F., 7, 127.
Dickson, I. L., & White, D. I. (2008). Tax design
insights from the New Zealand Goods and
services tax (GST) model.
Garg, G. (2014). Basic Concepts and Features
of Good and Service Tax in India. International
l August 2016
Journal of scientific research and management
(IJSRM),2(2), 
Iqbal, B. A. (2016). Emerging Issues of GST. The
MA Journal, 51(4), 14-18.
Ishak, N. I., Othman, M. H., & Omar, M. F.
(2015). Students’ perception towards the newly
implemented Goods and Services Tax (GST) in
Malaysia.International Journal of Contemporary
Applied Sciences, 2(6), 80-99.
Pope, J. (2001). Estimating and alleviating the
goods and services tax compliance cost burden
upon small business. Revenue Law Journal, 11(1), 2.
Ruggeri, G. C., & Bluck, K. (1990). On the
Incidence of the Manufacturers’ Sales Tax and
the Goods and Services Tax. Canadian Public
Policy/Analyse de politiques, 359-373.
Valadkhani, A. (2005). Goods and services
tax effects on goods and services included in
the consumer price index basket. Economic
Record,81(S1), S104-S114.
Vasanthagopal, R. (2011). GST in
India: A Big Leap in the Indirect Taxation
System. International Journal of Trade,
Economics and Finance, 2(2), 144.
Venkat, A. M. (2016). GST Model for India. The
MA Journal, 51(4), 27-29.
FOOT NOTE
Based on Hand Book of Statistics on the
Indian Economy, DBIE, RBI, accessed on 10th
July, 2016.
2009sumitbu@gmail.com
www.icmai.in
www.icmai.in August 2016 l The Management Accountant 101
INSTITUTE NEWS
Eastern India Regional Council
The Institute of Cost Accountants of India - Ranchi Chapter

O n July 1, 2016 the new session of the chapter

had been started and was attended by CMA A.D.
Wadhwa, past chairman, EIRC, CMA S.K. Singh, chairman
of the chapter and CMA Ranjit Agarwal, secretary of
the chapter. CMA A. D. Wadhwa narrated the students
about the course and future of CMAs.

Northern India Regional Council

O n April 23, 2016 the Region organized a seminar on

Service Tax and Budget - 2016 at Gurgaon. Mr. Parveen
Kumar, Partner, ASA & Associates LLP the keynote speaker
shared his valuable experience and knowledge on the above
theme. On April 30, 2016 the Region organized a seminar on
‘Success Role Model by CMAs in MSME and NSIC’ in which
Mr. R. K. Sharma, GM Finance, NSIC, Mr. Yeshwant Adarkar
and Mr. Ajay Mathur from SIDBI were special guest key note
speakers. Mr. R.K. Sharma elaborated various schemes of
NSIC which are available for the investors and how investors
can take the benefits of these schemes to grow further and
can actively participate in the growth of the country. Mr
Yeshwant Adarkar from SIDBI informed the delegates about
various project financing schemes available for small and
medium entrepreneurs and the benefits of these scheme these
entrepreneurs can take which are easily available and very
cheap in respect to capital cost. NIRC celebrated the Annual
day of the institute on May 28, 2016 where CMA P.V. Bhattad,
President, CMA Manas Kr. Thakur, Vice President of the
Institute, CMA I. Ashok, CMA H. Padmanabhan, CMA Niranjan
Mishra, CMA Sanjay Gupta & CMA Balwinder singh, Council
members, CMA Ravi K. Sahni, CMA Navneet Kumar Jain, RCMs
were present on the occasion.
The inaugural meeting of North West Delhi CEP Study Circle
was organized on May 29, 2016 on ‘CMAs role in Current
Business Environment’. Dr. Shobha V. Gupta, MCD Councilor,
the chief guest along with vice president of the Institute, CMA
Manas Kr. Thakur inaugurated first CEP Study Circle of Delhi.
Convener, CMA Sandeep Goel and Dy Convener CMA Raminder
Pal Kaur welcomed the members on this historic event. Other
dignitaries present were guest of honour CMA Sanjay Gupta,
council member, CMA S.K. Bhatt, chairman, NIRC, CMA Ravi K.

102 The Management Accountant l August 2016 www.icmai.in

 Sahni, vice chairman, NIRC, CMA Navneet Jain, RCM, CMA Harkesh Tara, Senior Practicing
member, CMA Ashok Aggarwal, past council member, CMA N.M. Gupta, past chairman, NIRC
and various other distinguished members attended the meet. Speakers on the topic CMA A.K.
Gautam, DGM, Finance of Power Grid Corporation and CMA Vijender Gupta, PCMA shared
their views and knowledge with other members present in the meet. The region conducted
the programme at Bikaner on ‘Role of CMA in Mining & Agro Industry’ delivered by CMA Ravi
Kr. Sahni, vice chairman, NIRC and CMA Rajender Singh Bhati, RCM, NIRC.

The Institute of Cost Accountants of India - Gorakhpur Chapter

O n May 21, 2016 the chapter organized a seminar on real estate, hospitals and educational institutions. Dr Radhamohan
Das Agrawal (MLA) was the chief guest on this occasion and he said that the role of cost accountants begins from
agriculture to industries and other service sectors. CMA S.S. Pandey, chairman of the chapter stressed upon updating of
knowledge, through continuing education and training which is possible by such seminars. CMA S.K. Bhatt, chairman, NIRC
presented his views very emphatically in a lucid way on Hospital (Health services).

The Institute of Cost Accountants of India - Lucknow Chapter

O n June 21, 2016 the chapter organized ‘International Yoga Day’.

The yoga was initiated by Patanjali Yoga Acharya, Raghunath
Prajapati and R. K. Triwedi along with CMA Pawan Kumar Tiwary,
chairman of the chapter, CMA Dharmendra Singh Saluja, vice
chairman of the chapter, CMA Amit Yadav, secretary of the chapter.
On June 26, 2016 the chapter organized a seminar on ‘Role of CMA
in Present Scenario and Updates on GST’ at CMA Bhawan. Mr. Vijay
Bhadur Yadav, Chairman of UP Cooperative Tribunal, was the chief
guest of the seminar and CMA Sunil Kumar Pandey, Dy. Director of
UIDAI was the guest of honour in the seminar.CMA Chandra Wadhwa,
past president of the Institute, the speaker and CMA Pawan Jaiswal,
special invited member on GST & DTC Matters, Govt. of India said
that Goods & Service Tax will change the present scenario of CMA
Professionals. After implementation of GST in Indian economy, it will
decrease the value of goods. Price will be fixed on PAN India bases.
On the same day the chapter conducted a Swachh Bharat Abhiyan at
CMA Bhawan. CMA Pawan Kumar Tiwary, Chairman of the chapter,
CMA Dharmendra Singh Saluja, Vice Chairman of the chapter, CMA
Amit Yadav, Secretary of the chapter, CMA Ranjeet Singh, CMA Sahil
and other members enthusiastically joined the initiative and cleaned
the premises.
On June 27, 2016 the chapter organized the meeting with Honorable
Cabinet Minister, Piyush Goyal, Minister of State with Independent
Charge for Power, Coal, New and renewable energy in Government of
India at BJP Karyalay, Hajratganj Lucknow. Management committee

www.icmai.in August 2016 l The Management Accountant 103

INSTITUTE NEWS

of the Chapter along with CMA Sunil Singh, Secretary, NIRC,

CMA Pawan Kumar Tiwary, chairman of the chapter, CMA
Dharmendra Singh Saluja, vice chairman of the chapter, CMA
Amit Yadav, secretary of the chapter, CMA Narandra Bhatt,
CMA Ranjeet Singh, CMA Sahil , CMA Durgesh Sahu, CMA
Avtar Singh, CMA Ankur Verma, CMA Shakambari Tiwari,
CMA Nancy Gupta and other members joined the meeting
and discussed the role of Cost Accountants in deciding the
tariff of electricity and utilization of the resources so that
electricity can reach each and every village.

The Institute of Cost Accountants of India - Jaipur Chapter

T he chapter had been selected as skill development centre

by Rajasthan Skill & Livelihoods Development Corporation
(RSLDC) and on June 3, 2016, there was a MoU between RSLDC
and the Institute signed by CMA Dr. I. Ashok, Council Member
& Chairman (CAT) on behalf of the Institute and on behalf
of RSLDC, it was signed by its Commissioner, Shri Krishna
Kunal, IAS. On the basis of MoU, youth will be given training
of Certificate in Accounting Technician (CAT) Course. On June
18, 2016 the chapter organized full day Seminar on ‘Cost Audit
Rules’ and ‘Cost Auditing Standards’. The first technical session
was conducted by CMA Alok Kumar Gupta, secretary of the
Chapter. In this session key speaker, CMA Vijender Sharma,
Council Member and Chairman, Professional Development
Committee explained in detail about the amendments in Cost
Audit Rules 2014. In the second technical session, Key Speaker
CMA Balwinder Singh, Council Member and Chairman, Cost
Accounting Standards Board gave detailed presentation on ‘Cost
Auditing Standards’ and emphasized to improve the quality of
Audit. On June 21, 2016 the chapter celebrated International Day
of Yoga at its premises wherein yoga exercises were performed
by the members and staffs under the guidance of CMA P.R. Jat,
chairman of the chapter. On June 25, 2016 as per the direction
of Govt of India and subsequent communication received from
the secretary of the Institute, Cleanliness Drive, Swachh Bharat
Abhiyan had been organized at its premises. CMA P.R. Jat,
chairman, CMA Alok Kumar Gupta, secretary, members and staff
took part with great enthusiasm in the cleanliness drive.

104 The Management Accountant l August 2016 www.icmai.in

 Southern India Regional Council
The Institute of Cost Accountants of India - Hyderabad Chapter

O n June 5, 2016 the chapter organized a programme on

‘Environmental, Sustainable Accounting and Auditing’ at
CMA Bhawan. Mrs. G. Vinulata, Founder Director of KV Environ
N Energy Management Consultants Pvt Ltd (KVEEC) and
Amber Flux Pvt Ltd (AmberFlux) explained the UN Sustainablity
Development Goals (SDG) and also initiatives taken by India.
On June 7, 2016 CMA Dr. R. Chandra Sekhar, Secretary, met Sri
Srinivas Reddy, Director and the principal of Pragnya Degree
College, Chandanagar, Hyderabad to discuss about the CMA
support centre to establish in this college and highlighted the
importance of CMA course, its career growth and opportunities
either in employment or practice. On June 10, 2016 the chapter
held an interactive meeting with CMA R. Lakshman R Watawala,
SAARC President and Past President, SAFA to discuss on the
latest developments in CMA profession in SAARC Region.
He also suggested having a joint programme for students at
Hyderabad with these two institutions. CMA D. Surya Prakasam,
Chairman, CMA Dr.PVS Jagan Mohan Rao, Council Member,
CMA A R V Badrinath, CMA Dr. R. Chandra Sekhar, Secretary,
CMA B.V.Ramana Murty, Past President, CMA P.Chandrasekhara
Reddy, MC Member, CMA D. Munisekhar, MC member graced
the occasion. On the same day the ICSI, Hyderabad Chapter
and the chapter had an interactive meeting at CMA Bhavan. The
meeting was conducted to discuss on proposed programmes for
students and members who are of common areas of interest for
both the Institutes. CMA D. Surya Prakasam, Chairman of the
chapter, CMA K.V.N Lavanya, Vice Chairperson of the chapter,
CMA Dr. R. Chandra Sekhar, Secretary of the chapter, CMA P.
Chandrasekhara Reddy, MC Member, CMA D. Munisekhar, MC
member and from the ICSI Hyderabad Chapter CS Mahadev,
Chairman, CS V. Ahalada Rao, Central Council Member, CS
R.Venkata Ramana, CS S. Kavitha Rani, Secretary and CS Rahul
Jain, Treasurer attended the meeting.
On June 25, 2016 the chapter held a discussion session
on ‘GST Model Act, 2016’ where CMA B. Mallikarjuna Gupta,
Development Business Analyst – Principal, Infor India Pvt.
Ltd. explained the key features of GST and the important
aspect of input tax credit in the proposed GST Act. CMA K.K.
Rao, Practicing Cost Accountant explained the role of Cost
Accountants. On June 26, 2016 the chapter in association with
the Corporate Laws Committee of the Institute organized a
program on ‘All India Internal Audit Week’ from June 26, 2016

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INSTITUTE NEWS

till July 2, 2016. CMA K. Narasimha Murty, Management

Consultant was the guest of honour where he explained about
the transformation in the audit function. He emphasized
that service industries, which are more complex, need a more
healthy risk management to be in place. On the same day
CMA A.V.N.S. Nageswara Rao, Practicing Cost Accountant,
deliberated on Internal Audit – Pharma Industry and briefly
explained the definition of internal audit and addressed some
of the risks faced by organizations. On June 27, 2016 CA Rakesh
Santhalia, CFO, Karvy Stock Broking spoke on Internal Audit
– Securities Market. On June 28, 2016 CMA Ch. Vijayananda,
Head, Accounts & Finance, L&T Metro Rail Hyderabad Ltd
spoke on Internal Audit – Infrastructure Industry and provided
an overview of the infrastructure industry in India with respect
to its size and investment. On June 29, 2016 CMA Atul Kumar
Agarwal, CFO, Mediplus Health Services on Healthcare Retail
mentioned that an internal auditor must have knowledge
of the business operations and its key drivers, a thorough
understanding about the industry and the company processes.
On June 30, 2016, CMA K K Rao, practicing cost accountant
narrated on Internal Audit-Construction Industry and also
explained the AS-7 and AS-9 used in recognizing revenues and
project cost allocation. On June 21, 2016 the chapter celebrated
International Yoga Day as suggested by the Head Quarter
of the Institute. The programme was conducted by ISHA
Foundation for members for the benefit of health, to remove
stress, to get success and to function efficiently in personal
life and professional life etc and the session was handled by
Ms. G. Shakuntala Jain, Trainer from Isha Foundation. On
June 22, 2016 the chapter held a Commerce Interactive Meet
at CMA Bhawan and Sri S.V. Satyanarayana, Head of the
Commerce, Osmania University was the chief guest of the Meet.
On June 30, 2016 the chapter conducted career counseling
programme at Badruka Degree College, Kachiguda and CMA
K.V.N. Lavanya, Vice Chairman of the chapter was the speaker
of the programme. On July 1, 2016 CMA D. Zitendra Rao,
practicing cost accountant briefed on Internal Audit – Power
Industry in which he started explaining the typical operations
of power industry, starting from generation to transmission
to distribution for both conventional and non-conventional
plants. On July 2, 2016 CMA N.S.V. Krishna Rao, practicing cost
accountant discussed on Internal Audit-Cement Industry where
he initially explained the kinds of cement and the process of
manufacture of cement.

106 The Management Accountant l August 2016 www.icmai.in

The Institute of Cost Accountants of India - Mysore Chapter

T he Chapter organized a full day seminar on ‘Goods

& Service Tax’ on July 2, 2016 inaugurated by CMA K
Sanyasi Rao, chairman, SIRC and Mr Subraya M Hegde, Retd
Joint Commissioner of Commercial Taxes (Legal Affairs) at
commissioner’s office, Bengaluru and presently working as
advisor, Fiscal Policy Institute, Govt of Karnataka. Mr Subraya
M Hegde, the resource person emphasized necessity for ‘Goods
and Service Tax’ which has the potential for improving GDP.
The second session had been addressed by CMA Girish K and
CMA Vishwanath Bhat emphasizing the role of practitioners in
helping the business for smooth implementation of GST.

The Institute of Cost Accountants of India - Trivandrum Chapter

T he Chapter conducted various activities in connection with

‘Swachh Bharat Pakhwada’ from 16 – 30 June 2016. The
main activities are mass pledge under the leadership of CMA
N P Sukumaran, past president of the Institute, cleaning the
bathrooms and premises of the chapter under the guidance of
CMA G.S Manoharan Nair, chairman of the chapter, cleaning
Vellayambalam Jawahar Lane under the leadership of CMA
Joseph Louis, secretary of the chapter.

The Institute of Cost Accountants of India - Bangalore Chapter

O n April 16, 2016 the chapter celebrated Founders Day of

the Institute on ‘CMA Profession – A Journey Unfolded’
and CMA Premnath Murthy, Management Consultant and
M&A Advisor and CMA Y.K. Venkatesh, ICAS, Adviser (Retd.),
Ministry of Finance, Dept. of Revenue CBEC, Directorate
General of Audit were the speakers of the programme.
On June 11, 2016 a professional development meet was
organized on ‘The new Insolvency and Bankruptcy Code,
2016 – Role of NCLT and Insolvency Professionals’ and CS
Thirupal G, Company Secretary was the speaker. On June 18,
2016 Practitioner’s Meet on ‘Practical Issues in Cost Audit
and Concerns of Cost Auditor’ was held and CMA Zitendra
Rao, Chairman, Sub-Committee for Members in Practice of
SIRC of the Institute and Chairman, Sub-Committee for Inter

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INSTITUTE NEWS

Institution Co-ordination of SIRC of the Institute

and CMA K. Suryanarayanan, SIRC Member
were the speakers of the Meet. On June 21, 2016,
International Yoga Day had been celebrated by
the chapter and Yogasana was conducted by CMA
Pranabandhu Dwibedy, Cost Accountant and Shri
Shankar & Shri Anjan, were the Karnataka Yoga
Teacher, Co-ordinator – Art of Living and Ms. Pooja,
was the dietician of the programme.

The Institute of Cost Accountants of India - Visakhapatnam Chapter

O n June 26, 2016, the chapter observed the Swachh

Bharat Pakhwada at its premises with reference to the
announcement of Government of India. CMA P.V.N Madhav,
chairman of the chapter, CMA M. Ramakrishna, secretary
of the chapter addressed about the significance of Swachh
Bharat. The Chapter organized a Professional Development
Programme on ‘India Prepares for GST’ on July 5, 2016 at
CMA Bhawan. Mr Karan Talwar explained about model GST
Law which was borrowed from other countries especially
European countries. He discussed Central Goods and Service
Tax (CGST), State Goods and Service Tax (SGST), Integrated
Goods and Service Tax (IGST), broad coverage of supply and
supply without consideration, Application of GST in Securities
sale, work contract on construction, supply of food & drinks
(Except Alcohol) & transfer of right to use. Mr G Prahlad , the
speaker said CGST cannot be adjusted with SGST as one is
central and another is State.

The Institute of Cost Accountants of India - Coimbatore Chapter

T he Chapter conducted a faculty meeting of the 82nd

session on June 4, 2016. The focus of the meeting was on
improving the results and attendance of the students. On
June 21, 2016 the chapter celebrated International Yoga Day
by Sri Avinashilingam & Smt Ponmani Avinashlingam, Yoga
Trainers, Coimbatore. On June 23, 2016 the Chapter arranged
a career counseling programme conducted by vice chairman of
the chapter, CMA Subbaraman and secretary of the chapter,
CMA Venkateswar. B. at Nehru College of Arts & Science,

108 The Management Accountant l August 2016 www.icmai.in

 Coimbatore. As part of Swachh Bharat Pakhwada and as
per the instruction of Headquarter of the Institute, pledge
was taken by the chapter members and students on June
29, 2016 and cleaning of nearby school ground was done on
June 30, 2016.

Western India Regional Council

The Institute of Cost Accountants of India - Surat South Gujarat Chapter

O n June 5, 2016 the chapter celebrated the world

environment day at chapter’s campus. The chapter took
an initiative to give interview in local TV Channel, ‘Channel
Surat’ on June 3, 2016 to spread awareness about CMA
course in general public. In response to the call given by
Prime Minister Narendra Modi and the directive from the
President of the Institute, the chapter celebrated June 21,
2016 as Yoga Day at conference hall of the chapter. CMA
Manubhai K Desai, chairman of the chapter welcomed &
introduced Mr. Kandarp Sharma, yoga teacher of ART OF
LIVING -Surat Unit, who explained the concept of Yoga. The
chapter conducted a CEP on ‘Practical Aspects of Cost Audit’
on June 23, 2016 at chapter’s office. CMA Dr. Dhananjay
V. Joshi, practicing cost accountant and past president of
the Institute was invited as the faculty for the CEP. The key
note speaker CMA Dr. D. V. Joshi dealt with the subject and
gave a brief idea about the history and practical aspects
of Cost Audit. On July 4, 2016 the chapter conducted
the inauguration function of oral learning classes at its
auditorium conducted by Principal, Dr. Avnindra Dixit, DRB
College of Commerce, Surat. Dr Avnindra Dixit complemented
the students to join this valuable professional course in the
era of global industrial competition & advised the students
to work hard with full concentration. CMA Manubhai K.
Desai, chairman of the chapter emphasized that the chapter
completed 24 years of its establishment and entered the
silver jubilee year in March 2016. Dr. Dhaval Pandya, senior
faculty of oral coaching classes of the chapter presented vote
of thanks.

www.icmai.in August 2016 l The Management Accountant 109

INSTITUTE NEWS

The Institute of Cost Accountants of India - Indore Dewas Chapter

O n June 21, 2016 the chapter observed international Yoga

day. Dr Sangram Singh, , a renowned paediatrician of
Indore and faculty of ‘Art of Living’ taught various yogic kriyas,
asanaas, pranaayam, meditation techniques and explained
benefits of regular yoga to the members. Chairman of the
chapter, CMA Vineet Chopra explained about significant
contribution of yoga on mental peace, development and threw
light on positive effects of practicing yoga on soul and mind.

The Institute of Cost Accountants of India - Pune Chapter

T he Chapter on May 21, 2016 observed Anti Terrorism Day as

per the guidelines of the Institute and all the members present
and staff of the chapter took a pledge for assisting society from
violence. On May 28, 2016 the chapter celebrated Annual Day of
the Institute by arranging variety of programmes for members of
the chapter and students. In the Morning , Parvati Hill Climbing
competition was organized. Senior Member, CMA D.V. Joshi, Past
President of the Institute, CMA D V Patwardhan, Past Chairman of
the chapter and CMA P V Gokhale participated in the programme.
This was followed by Cleanliness Drive (Swachh Bharat Abhiyan)
arranged at chapter’s premises. Managing Committee, other
members & staff of the chapter participated in this drive. From
June 8, 2016 till June 21, 2016 the chapter organized yoga classes
and the trainer for the same was Past Chairman and Past Director
of the Chapter CMA D V Patwardhan. The chapter organized a
CEP programme on ‘Model GST Law 2016’ on June 23, 2016 at
its premises. In the technical session CMA Dr. Sanjay Bhargave,
the guest speaker explained in detail Draft GST law. The main
emphasize was given on highlights of GST, applicability of GST
based on turnover limits, similarity as well as peculiarity with
central excise and service tax rules. Concepts related with GST
such as SGST, CGST & IGST were also discussed.

110 The Management Accountant l August 2016 www.icmai.in

The Institute of Cost Accountants of India - Nasik-Ojhar Chapter

T he Chapter participated in career education fair

conducted by ‘Sakal Papers’, the renowned newspaper
group in Nasik from June 3 to June 5, 2016. The chapter
in association with Computer Society of India, one of the
premier profession Institute in India organized seminar
on ‘CISA – Awareness’ on June 10, 2016. This seminar was
conducted in collaboration with ISACA, Pune Chapter.
International Systems Audit and Control Association, is an
International body which conducts this examination and
CISA is a renowned certification worldwide. Information
about CISA Certification and opportunities in the market
were discussed in the seminar. The chapter in association
with Nashik Chapter of WIRC of ICSI organized a half day
seminar on ‘Registration of charges with ROC & Wealth
creation through Capital Markets’ on June 23, 2016. CA
Saleem Raja, renowned chartered accountant in Nashik
explained registration of charges with ROC. Mr. Jai R.
Sanghavi, spoke on wealth creation through capital market
by giving the various examples of current market situation.
The vote of thanks was given by CMA Pradnya Chanorkar
chairperson of the chapter. The seminar was attended by
CMA and CS members.

The Institute of Cost Accountants of India - Pimpri Chinchwad Akurdi Chapter

T he Chapter celebrated 5th anniversary and the annual

day of Institute on May 28, 2016 with the presence of
CMA B M Sharma, past president of the Institute. CMA
Pradeep Deshpande reminisced about the initial challenges
and discussed on the flourish of the chapter with the
support from the WIRC, HQ, senior members, well wishers
and specially Aurangabad Chapter. CMA L D Pawar, founder
chairman and present RCM briefly traced the journey of the
chapter from the time it germinated as an idea in 2009 to its
eventual inauguration on May 25, 2011. He noted with pride
that in the five years, the chapter had marked many singular
achievements. CMA B M Sharma asserted that the chapter
strived to ensure quality in service provided to students and
members. He guided the students to rely on hard work and
positive attitude to achieve success in exams.

www.icmai.in August 2016 l The Management Accountant 111

FROM THE RESEARCH DESK
Role of CMAs
in
Capacity Building for
Sustainability
• Skill and Entrepreneurship Development for Capacity Building –
The MOU has been signed by the Institute with National Skill Development Agency (NSDA),
an autonomous body of the Ministry of Skill Development & Entrepreneurship, Government
of India and Entrepreneurship Development Institute of India (EDI), Gujarat , to enable
offering various collaborative activities to promote and encourage skill and entrepreneurship
development in India. The Institute has already started conducting seminars and workshops
jointly with various colleges and universities regarding skill and entrepreneurship development
as a part of capacity building activities.

• Encouraging Foreign Direct Investment (FDI) –

The youth to be provided with quality of knowledge and technical skills and encourage them
for self–employment and entrepreneurship development by providing financial assistance.
This would result to employment generation and development of the economy. Foreign Direct
Investment in the form of foreign capital plays a significant role in Capacity Building for
growth and development of a nation. FDI plays an important role of bridging the gap between
the available resources and the required resources. It plays an important role in the long-term
development of a country not only as a source of capital but also for enhancing competitive-
ness of the domestic economy through transfer of technology, intensifying infrastructure,
raising productivity and generating new employment opportunities. Thus CMAs through Re-
source Mapping, Risk Mapping and Capital Rationing of corporate sources can improve cost
competitiveness and capacity building for national sustainability.

• Socio-Economic Development –
Human Resource Development is the key in the process of socio- economic development of
a nation. Human capital formation is both qualitative and quantitative in the sense that it

112
112 The Management Accountant l August 2016 www.icmai.in
 involves attainment of the skills, education, experience and training that enables them to
perform effectively. The Institute as a part of its obligation regulates the profession of Cost and
Management Accountancy, enrolls students for its courses, provides coaching facilities to the
students, organizes professional development programmes for the members, and undertakes
research programmes in the field of Cost and Management Accountancy and as a result
contributes in human capital formation through skill development and capacity building.

• Women Entrepreneurship –
Women are equally competent in today’s competitive world. The attitudinal and educational
development has brought about a strong and conspicuous change in them enabling them to
be employed at all places where men have been. To encourage young women towards women
entrepreneurship, the Government has announced various subsidies and loan assistances in
India. The CMAs can keep a track on allocation and apportionment of fund allotted to the
rural and urban woman entrepreneurs. With their professional expertise can facilitate women
entrepreneurs to take suitable strategies for business sustainability.

• Innovative Education & IT Literacy –

Improving quality of the education is utmost required for nation building throughout the
country, including in the backward regions where people do not have easy access to education and
also paying special attention to disadvantaged groups like the poor, females and the minorities.
Encouraging international cooperation in the field of education, including working closely
with the UNESCO and foreign governments as well as Universities, to enhance the educational
opportunities in the country is also need of the hour. The Institute in association with various
National and International organizations is trying to promote professional education across
the globe.

• Strengthening Culture and Values in Education –

Culture has the power to transform entire societies, fortify local communities and create a
sense of identity for people of all ages. Culture plays an essential role in promoting sustainable
social and economic development for future generations. Youth can act as a bridge between
cultures and serve as key agents in promoting peace and intercultural understanding. The
Institute has already started conducting workshops on values and ethics for strengthening
core universal human values like Truth, Peace, Love, Righteous Conduct, Non-Violence and the
Values enshrined in the constitution of India for Human Resource Development.

• Evaluation of Capacity Building through Human Resource Accounting –

The Human Resource Accounting information has a noteworthy influence on the accounting
information systems of capacity building activities to reduce cost, improve operational
performance and had contributed to increase efficiency and effectiveness of accounting
information systems in organizations. The use of Human resource accounting information
system in various organizations contributes to the improvement of services provided to the
clients. The CMAs can assess the human resource accounting information for cost control and
cost competitiveness for sustainability of Accounting Information System.

www.icmai.in August 2016 l The Management Accountant 113

ECONOMY & TAX UPDATES
Customs
Notifications:
Tariff:
 Seeks to further amend notification No. 27/2011-Customs,
dated 01.03.2011 so as to provide exemption from export
duty to Organic sugar up to 10,000 MT in a year beginning
with October and ending with September subject to specified
conditions. The exemption for the period ending with 30th
September, 2016 shall be restricted to 2500 MT.
[Notification No. 43/2016-Cus,dt. 26-07-2016]
 Seeks to further amend notification No. 12/2012-Customs,
dated 17.03.2012 [S. No. 284A] so as to provide that the
manufacturer or merchant-exporter, referred to therein, may
also be registered with the Cotton Textiles Export Promotion
Council, in addition to Apparel Export Promotion Council or
the Synthetic and Rayon Textile Export Promotion Council and
may seek certification from any of the aforesaid bodies for the
purposes of availing duty free import entitlement under the said
entry.
[Notification No. 42/2016-Cus,dt. 11-07-2016]
 Seeks to further amend Notification No. 27/2011-Customs,
dated the 1st March, 2011, so as to provide exemption from
export duty to sugar exported under Advance Authorization
Scheme subject to specified conditions.
[Notification No. 41/2016-Cus,dt. 06-07-2016]
 Seeks to further amend notification No. 53/2011-Customs
dated 01st July, 2011 so as to provide deeper tariff concessions
in respect of specified goods imported from Malaysia under
the India-Malaysia Comprehensive Economic Cooperation
Agreement (IMCECA) w.e.f. 30.06.2016.
[Notification No. 40/2016-Cus,dt. 21-06-2016]
Non-Tariff:
 Central government specifies following classes of goods:
 Silver bullion
 Cigarettes
[Notification No. 103/2016-Cus (NT), dt. 25-07-2016]
 Rate of exchange of conversion of the foreign currency
with effect from 22nd July, 2016
[Notification No. 102/2016-Cus (NT), dt. 21-07-2016]
 Tariff Notification in respect of Fixation of Tariff Value of
Edible Oils, Brass Scrap, Poppy Seeds,Areca Nut, Gold and Sliver
[Notification No. 101/2016-Cus (NT), dt. 15-07-2016]
114 The Management Accountant l August 2016
 Appointment of Common Adjudicating Authority
[Notification No. 99/2016-Cus (NT),dt. 14-07-2016]
 Rescinding notification No.18/2003-Customs dated 1st
March 2003.
[Notification No. 98/2016-Cus (NT), dt. 08-07-2016]
 Honnavar Port (amending Notification No.62/1994-Customs
(N.T.) dated 21.11.1994.)
[Notification No. 97/2016-Cus (NT),dt. 08-07-2016]
 Rate of exchange of conversion of the foreign currency with
effect from 7th July, 2016
[Notification No. 96/2016-Cus (NT),dt. 06-07-2016]
 Tariff Notification in respect of fixation of Tariff Value of
Edible Oils, Brass Scrap, Poppy Seeds, Gold and Sliver
[Notification No. 95/2016-Cus (NT),dt. 05-07-2016]
 Appointment of Common Adjudicating Authority
[Notification No. 94/2016-Cus (NT),dt. 01-07-2016]
Appointment of Common Adjudicating Authority
[Notification No. 93/2016-Cus (NT),dt. 01-07-2016]
 Tariff Notification in respect of Fixation of Tariff Value of
Edible Oils, Brass Scrap, Poppy Seeds, Gold and Sliver
[Notification No. 92/2016-Cus (NT),dt. 30-06-2016]
 Exchange Rate notfn. with effect from 30th
June, 2016 thereby amending Notfn.
87/2016-Cus (NT)
[Notification No. 91/2016-
Cus (NT),dt. 29-06-2016]
Anti Dumping Duty:
 Seeks to amend
notification No.67/2011-
Customs dated the
26th July, 2011 so as to
to extend the levy of
anti-dumping duty on
imports of certain Rubber
Chemicals, namely PX13
and TDQ originating in, or
exported from, European
Union and MOR originating
www.icmai.in
in, or exported from, People’s Republic of China, (imposed vide
notification No. 67/2011-Customs, dated 28th July, 2011) for a
period of one year i.e. upto and inclusive of the 27th July, 2017.
[Notification No. 35/2016-Cus (ADD), dt. 26-07-2016]
 Seeks to impose definitive anti-dumping of all imports of Plain
Medium Density Fibre Board (MDF) having thickness of 6mm and
above, originating in or exported from Indonesia and Vietnam.
[Notification No. 34/2016-Cus (ADD), dt. 14-07-2016]
 Seeks to amend No.6/2016-Customs (ADD), dated the 8th
March, 2016.
[Notification No. 33/2016-Cus (ADD), dt. 14-07-2016]
 Seeks to amend notification No.23/2012-Customs (ADD)
dated the 4th May, 2012.
[Notification No. 32/2016-Cus (ADD), dt. 14-07-2016]
 Seeks to amend notification No.61/2011-Customs dated
15.07.2011.
[Notification No. 31/2016-Cus (ADD), dt. 11-07-2016]
 Seeks to impose definitive anti-dumping duty on
1,1,1,2-Tetrafluoroethane or R-134a originating in or exported from
People’s Republic of China for a period of five years
[Notification No. 30/2016-Cus (ADD), dt. 11-07-2016]
 Seeks to amend notification No. 7/2016-Customs (ADD)
dated 08.03.2016 so as to exclude Expanded Polypropylene
beads and ter-polymer from the description of goods
attracting anti-dumping duty.
[Notification No. 29/2016-Cus (ADD), dt.
05-07-2016]
 Seeks to impose definitive
anti-dumping duty on “Purified
Terephthalic Acid” including
its variants Medium Quality
Terephthalic Acid (MTA) and
Qualified Terephthalic Acid
(QTA), originating in or
exported from China PR,
Iran, Indonesia, Malaysia
and Taiwan, for a period
of five years from the
date of imposition of
provisional anti-dumping
duty
[ N o t i fi c a t i o n N o .
28/2016-Cus (ADD), dt.
www.icmai.in
05-07-2016]
Safeguards Duty:
No new Notification
CVD
No new Notification
Central Excise
Notifications:
Tariff:
 Seeks to amend notification No. 17/2011-Central Excise, dated
the 1st March, 2011, so as to exclude handicrafts falling under
heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986), from
the purview of excise duty exemption for “handicrafts”.
[Notification No. 29/2016-CE, dt. 26-07-2016]
 Seeks to amend notification No. 8/2003-Central Excise dated
1st March, 2003, so as to increase the SSI Exemption limit and the
SSI Eligibility limit for articles of jewellery or parts of articles of
jewellery or both, falling under heading 7113 of the Central Excise
Tariff Act, 1985 (5 of 1986).
[Notification No. 28/2016-CE, dt. 26-07-2016]
 Seeks to partially exempt Central Excise duty on
articles of jewellery falling under heading 7113 of the
Central Excise Tariff Act, 1985 (5 of 1986) manufactured by:
   (a) re-conversion of jewellery given by the retail customer, or 
   (b) mounting of precious stone given by the retail customer.
[Notification No. 27/2016-CE, dt. 26-07-2016]
 Seeks to amend notification No. 12/2012-Central Excise so
as to prescribe 1% excise duty (without input and capital goods
credit) on parts of articles of jewellery falling under heading 7113
of the Central Excise Tariff Act, 1985 (5 of 1986), and to prescribe a
criteria for classification of an articles of jewellery or part of articles
of jewellery or both as that of a particular precious metal.
[Notification No. 26/2016-CE, dt. 26-07-2016]
Non Tariff:
 Seeks to amend notification No. 36/2001-Central Excise (N.T.)
dated 26th June, 2001, so as to exempt a manufacturer or principal
manufacturer of articles of jewellery or parts of articles of jewellery
or both, falling under heading 7113 of the Central Excise Tariff Act,
1985 (5 of 1986) from taking central excise registration upto the
full exemption limit.
[Notification No. 40/2016-CENT dt. 26-07-2016
August 2016 l The Management Accountant 115
E C O N O M Y & TA X U P DAT E S

 Seeks to amend notification No. 17/2006-Central Excise [Notification No. 33/2016-CENT dt. 26-07-2016]
(N.T) dated the 1st August, 2006 so as to exempt a manufacturer
or principal manufacturer of articles of jewellery or parts of  Seeks to further amend notification No. 35/2001-Central
articles of jewellery or both, falling under heading 7113 of the Excise (NT) dated 26.06.2001 so as to exempt mandatory
Central Excise Tariff Act, 1985 (5 of 1986) from filing of annual physical verification of manufacturing premises in respect of
return. manufacturers of readymade garments and made up articles of
[Notification No. 39/2016-CENT dt. 26-07-2016 textiles.
[Notification No. 32/2016-CENT dt. 11-07-2016]
 Seeks to amend notification No. 35/2001-Central Excise
(N.T.) so as to:  Amendment of notification no. 17/2004-CE (NT) dated
  (i) provide that a person engaged in the manufacture of 04.09.2004 for supply of exempted bunker fuel to the specified
articles of jewellery or parts of articles of jewellery or both, Indian Ships / Vessels from the warehouse
falling under chapter heading 7113 of the First Schedule [Notification No. 31/2016-CENT dt. 04-07-2016]
to the Central Excise Tariff Act, 1985 (5 of 1986) may get
himself registered by 31st day of July, 2016;  Specifies that a person who is registered as a FSD shall not
   (ii) exempt a person engaged in the manufacture of be required to take registration as an importer, and vice versa
articles of jewellery or parts of articles of jewellery or both, [Notification No. 30/2016-CENT dt. 28-06-2016]
falling under chapter heading 7113 of the First Schedule
to the Central Excise Tariff Act, 1985 (5 of 1986) from the
requirement to submit plan of the factory premises under Service Tax
simplified registration procedure. Notifications:
[Notification No. 38/2016-CENT dt. 26-07-2016]
No new Notification
 Seeks to provide a modified format for quarterly return,
ER-8, for return of excisable goods cleared at the Central Excise Income Tax
duty rate of 1% [including articles of jewellery or parts of articles
of jewellery or both, falling under heading 7113] or 2%. Notification:
[Notification No. 37/2016-CENT dt. 26-07-2016]
 In exercise of the powers conferred by sub-section (1) and
 Seeks to amend the CENVAT Credit Rules, 2004 in relation subsection (2) of section 199 of the Finance Act, 2016 (28
to articles of jewellery or parts of articles of jewellery or both, of 2016), the Central Board of Direct Taxes, makes
falling under heading 7113 of the First Schedule to the Central the following rules further to amend the
Excise Tariff Act, 1985 (5 of 1986). Income Declaration Scheme Rules,
[Notification No. 36/2016-CENT dt. 26-07-2016] 2016 (hereinafter referred to as
the principal rules) namely:-
 Seeks to amend the Central Excise Rules, 2002 in relation to
articles of jewellery or parts of articles of jewellery or both, falling 1. (1) These rules may
under heading 7113 of the First Schedule to the Central Excise be called the Income
Tariff Act, 1985 (5 of 1986). Declaration Scheme,
[Notification No. 35/2016-CENT dt. 26-07-2016] (Amendment) Rules,
2016.
 Seeks to notify the Articles of Jewellery (Collection of Duty) (2) These rules shall
Rules, 2016, applicable to articles of jewellery or parts of articles come into force from
of jewellery or both falling under heading 7113 of the Central the date of their
Excise Tariff Act, 1985 (5 of 1986). publication in the
[Notification No. 34/2016-CENT dt. 26-07-2016] Official Gazette.
2. In the principal rules,
 Seeks to notify the tariff values for articles of jewellery or in Form-1, for serial
parts of articles of jewellery or both, falling under heading 7113 of numbers 1 and 2 and
the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). entries relating thereto

116 The Management Accountant l August 2016 www.icmai.in

 the following serial numbers and entries shall be substituted.
For details see the following link – http://www.incometaxindia.
gov.in/communications/notification/ notification602016.pdf
[Notification No.60/2016, F.No.142/8/2016-TPL, New Delhi,
the 20th July, 2016]
 In exercise of the powers conferred by section 187 of the
Finance Act, 2016 (28 of 2016), the Central Government hereby
amends the notification of the Ministry of Finance (Department
of Revenue), notification number S.O.1830(E) dated the 19th
May, 2016, published in the Gazette of India, Extraordinary,
Part-II, Section- 3, Sub-section (ii) dated the 19th May, 2016.
2. In the said notification, for clause (ii), the following clause
shall be substituted, namely:-
“(ii) the date on or before which the tax and surcharge is
payable under section 184, and the penalty is payable under
section 185 in respect of undisclosed income shall be as follows,
namely:-
(a) the 30th day of November, 2016, for an amount not less
than twenty-five per cent. of such tax, surcharge and
penalty;
(b) the 31st day of March, 2017, for an amount not less than
fifty per cent. of such tax, surcharge and penalty as reduced
by the amount paid under clause (a);
(c) the 30th day of September, 2017, for the whole amount
payable under section 184 and 185 as reduced by the
amounts paid under clause (a) and (b);”.
[Notification No.59/2016, F.No.142/8/2016-TPL, New Delhi,
the 20th July, 2016]
 In exercise of the powers conferred by the
third proviso to sub-section (2) of section
92C of the Income-tax Act,1961 (43 of
1961), read with proviso to sub-rule
(7) of rule 10CA of the Income-
tax Rules, 1962, the Central
Government hereby notifies
that where the variation
between the arm’s length
price determined under
section 92C and the
price at which the
international transaction
or specified domestic
transaction has actually
been undertaken does
not exceed one percent.
of the latter in respect
of wholesale trading and
three percent.of the latter
www.icmai.in
in all other cases, the price at which the international transaction
or specified domestic transaction has actually been undertaken
shall be deemed to be the arm’s length price for Assessment Year
2016-2017.
Explanation.- For the purposes of this notification, “wholesale
trading” means an international transaction or specified domestic
transaction of trading in goods, which fulfils the following
conditions, namely:-
purchase cost of finished goods is eighty percent. or more of
the total cost pertaining to such trading activities; and
average monthly closing inventory of such goods is ten
percent. or less of sales pertaining to such trading activities.
[Notification No. 57/2016/F. No. 500/1/2014-APA-II, New
Delhi, the 14th July, 2016]
 In exercise of the powers conferred by sub-section (2) of
section 138 of the Income-tax Act, 1961(43 of 1961), the Central
Government having regard to all the relevant factors, hereby
directs that no public servant shall produce before any person
or authority any such document or record or any information or
computerised data or part thereof as comes into his possession
during the discharge of official duties in respect of a valid
declaration made under ‘the Income Declaration Scheme, 2016’,
contained in Chapter IX of the Finance Act, 2016 (28 of 2016).
[Notification No. 56 /2016, F.No.142/8/2016-TPL, New Delhi,
the 6th July, 2016]
 In exercise of the powers conferred by section 9 and section
285A, read with section 295 of the Income-tax Act, 1961 (43
of 1961), the Central Board of Direct Taxes hereby makes the
following rules further to amend the Income-tax Rules, 1962,
namely: - 1. (1) These rules may be called the Income-tax (19th
Amendment), Rules, 2016. (2) They shall come into force on the
date of their publication in the Official Gazette. 2. In the Income-
tax Rules, 1962 (hereinafter referred to as the said rules), in Part
II, after sub-part H, the following sub-part shall be inserted.
For details see the following link – http://www.incometaxindia.
gov.in/communications/notification/ notification552016.pdf
[Notification No.55 /2016 F. No. 142/26/2015-TPL, New Delhi,
the 28th June, 2016]
 In exercise of the powers conferred by clause(ha) of sub-
section (2) of section 295 of the Income-tax Act, 1961 (43 of 1961),
the Central Board of Direct Taxes hereby makes the following
rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (18th
Amendment) Rules, 2016.
(2) They shall come into force on the 1st day of April, 2017.
2. In the Income-tax Rules, 1962 (hereinafter referred to as
the said rules), after rule 127, following rule shall be inserted,
August 2016 l The Management Accountant 117
E C O N O M Y & TA X U P DAT E S

namely:- Amendment) Rules, 2016.

“128. Foreign Tax Credit.- (1) An assessee, being a resident
shall be allowed a credit for the amount of any foreign tax paid
by him in a country or specified territory outside India, by way
of deduction or otherwise, in the year in which the income
corresponding to such tax has been offered to tax or assessed
to tax in India, in the manner and to the extent as specified in
this rule:
Provided that in a case where income on which foreign tax
has been paid or deducted, is offered to tax in more than one
year, credit of foreign tax shall be allowed across those years
in the same proportion in which the income is offered to tax or
assessed to tax in India.
For details see the following link –http://www.incometaxindia.
gov.in/communications/notification/ notification542016.pdf
[Notification No. 54/2016 F.No.142/24/2015-TPLNew Delhi,
the 27th June, 2016]
(2) They shall come into force on the date of their publication
in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereafter referred to as the
said rules), after rule 37BB, the following rule shall be inserted,
namely :-
“37BC. Relaxation from deduction of tax at higher rate
under section 206AA.- (1) In the case of a non-resident, not
being a company, or a foreign company (hereafter referred to
as ‘the deductee’) and not having permanent account number
the provisions of section 206AA shall not apply in respect of
payments in the nature of interest, royalty, fees for technical
services and payments on transfer of any capital asset, if the
deductee furnishes the details and the documents specified in
sub-rule (2) to the deductor.
[Notification No. 53 /2016, F.No.370 142/16/2016-TPL, New
Delhi, the 24 th June, 2016]

 INCOME-TAX S.O. 2196 (E).— In exercise of the powers

conferred by clause (ii) of sub-section (7) of section 206AA, read
with section 295 of the Income-tax Act, 1961 (43 of 1961), the
Central Board of Direct Taxes hereby makes the following rules Contributed by
further to amend the Income-tax Rules, 1962, namely:- Taxation Committee
1. (1) These rules may be called the Income-tax ( 17th Institute of Cost Accountants of India

NON - RECEIPT OF THE MANAGEMENT ACCOUNTANT JOURNAL

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118 The Management Accountant l August 2016 www.icmai.in


Ease of doing business for
EOU/EHTP/STP/BTP operations
CMA A. B. Nawal
Chairman
Taxation Committee
Institute of Cost Accountants of India
CBEC needs to be congratulated and also to be appreciated
for bringing radical change in the operations of the EOU/EHTP/
STP/BTP Units. Hon’ble Prime Minister of India will be very happy
for such initiatives taken by CBEC appreciating the difficulties
faced by EOU/EHTP/STP/BTP Units and created conducive &
trust based environment which will initiate lot of FDI to support
“Make in India” movement.
In the last month as a part of Ease of Doing Business action
plan, Warehousing Provisions for goods were substantially
simplified but still EOU/EHTP/STP/BTP Units were not being given
the preferential treatment even though they bring good amount
of Foreign Exchange also create employment which was explained
to Chairman CBEC & Mr. Sandeep Kumar, Commissioner of
Customs, CBEC and also submitted detailed alternatives for ease
of doing business for EOU/EHTP/STP/BTP Units.
Within 15 days. CBEC has issued the notification no 44/2016-
Cus dated 29th July 2016 and detailed circular no 35/2016-
Cus dated 29th July 2016 not only dispensing “Bonding and
Manufacture in Bonded Premises requirement” but also
made procedural simplifications with 100% trust and totally
avoiding interface with the Excise & Custom Officials but
ensuring record based strict accounting of duty free material
and monitoring input & output norms. Date of freedom is
announced as 13th August 2016 i.e. 2 days ahead of independence
day of India.
A. Impact of the amendments
Notification No. 52/2003-Cus dated 31.03.2003 has been
amended so as to delicense the EOU/EHTP/STP/BTP units as
bonded warehouse under Customs Act, 1962 with effect from
13th August, 2016.
www.icmai.in August 2016
TAXATION
In short, the EOU/EHTP/STP/BTP units need not to have
bonded warehouse license under Section 58 and permission
Section 65 of Customs Act, 1962. In effect these units need not
to comply with various warehousing provisions.
The Warehoused Goods (Removal) Regulations, 2016, The
Warehouse (Custody and Handling of Goods) Regulations, 2016
and Public Warehouse Licensing Regulations, 2016 will no longer
be applicable.
Following warehousing provisions need not to be complied by
EOU/EHTP/STP/BTP units:
1. No need for application to Principal Commissioner for
private bonded warehouse under Section 58 & permission
under 65 of Customs Act, 1962.
2. No need to provide various undertakings to Principal
Commissioner
3. No need to appoint warehouse keeper and obtain digital
signature of such person
4. No need to provide all insurance risk policy to Principal
Commissioner
5. No need to obtain warehouse code from jurisdictional
Customs officer
6. Bill Entry for Home Consumption will be required at the
clearance from Port of Import instead of Bill of Entry
for warehousing.
7. No re-warehousing is required to be done by these units
after 13th August 2016.
8. No permission is required to be obtained for supply of
goods from one unit to other.
9. No inspection of seal/goods by proper officer.
10. No need to file ex-bond bill of entry at the time of removal
of goods from premises of EOU/EHTP/STP/BTP units.
l The Management Accountant 119
TA X AT I O N
B. Records to be maintained
1. Such units need to maintain records of receipt, storage,
processing and removal of goods imported by such units under
Notification 52/2003 Cus. as per new formats prescribed in the
Circular 35/2016 Cus dated 29th July 2016.
2. The records to be maintained in digital format as per the
details contained in the Form A provided in circular 35/2016 Cus
dated 29th July, 2016.
3. The records of goods received on or after 13th August 2016
shall be maintained as per Form A. The information regarding the
stock of goods lying with the unit need to be integrated into the
digital record prescribed under this circular.
4. Further, details of goods (inputs, packing material, spares,
consumables, components etc) of processing is completed or
cleared from the unit need not to be incorporated in the digital
records. Data relating to capital goods which are already cleared
need not be updated in the digital records
5. All units are required to enter data accurately and
immediately upon the goods being received in or removed from
the unit. The digital records should be kept updated, accurate,
complete and available at the unit at all times for verification by
the proper officer, whenever required.
6. The records cannot be maintained in the excel format since
it is mandate to keep the records in digital form. The software for
maintenance of digital records must incorporate the feature of
audit trail which means a secure, computer generated, time-
stamped electronic record that allows for reconstruction of the
course of events relating to the creation, modification, or
deletion of an electronic record and includes actions at the
record or system level, such as, attempts to access the system or
delete or modify a record.
C. Procedure for Import
The Units shall continue to obtain / furnish a Procurement
Certificate at the Customs Station at the time of import or pre-
authenticated procurement certificates, as applicable to them;
1. Upon receipt of goods in the unit, a copy of the relevant bill
of entry shall be provided to the jurisdictional office;
2. The jurisdictional office shall reconcile the imports with
procurement certificates.
D. Procedure for Inter-unit transfer of Capital Goods
and manufactured goods
1. Prior intimation to given to the jurisdictional Central excise
officer.
2. Any procurement by one unit from another should
be supported by a procurement certificate or pre-
authenticated procurement certificates, as applicable;
3. The supply of the goods from one unit to another shall
be based upon the usual commercial documents, such as,
120 The Management Accountant l August 2016
invoice & delivery challan;
Upon receipt of goods, copies of documents shall be provided
to the jurisdictional office of the sending and receiving unit by
way of intimation;
E. Monthly Return
A digital copy of Form A, containing transactions for
the month, shall be provided to the proper officer, by the
10th day of subsequent month in a CD or Pen drive, as
convenient to the unit. Freedom has been given to make
suitable addition compilation of the related information
considering the requirement of the unit.
It is expected that similar amendment in notification and
procedures to be made in Notification 22/2003 CE dated
31.03.2003 for procurement of Indigenous goods or there may
be a possibility to reside the said notification which would be in
line with model GST Law.
While rejoicing we give below the list of work to be done
immediately,
a) Completion of the Bond register and reconciliation thereof.
b) Verification of the duty free indigenous & imported capital
goods as on 13th August 2016 reconciling with the Bond
Register and carry forward the same for the record keeping
requirement mentioned in point B above and monthly
returns.
c) Reconciliation of Job Work challan & stock lying the job
worker as on 13th August 2016 and carryforward the same
in the for the record keeping requirement mentioned in
point B above and monthly returns.
d) Verification of the stocks of duty free imported &
indigenous raw material, consumable as on 13th August
2016 and carry forward the same for the record keeping
requirement mentioned in point B above and monthly
returns.
e) If input & output norms are not fixed or all items are not
covered under prescribed SION (Standard Input & Output
Norms) then suitable application for fixation / modification
of SION.
f) Monitoring of actual consumption with Input & Output
norms and payment of duties in case of adverse variance
/ excess consumption.
g) Upgradation of existing software system to comply with
the above requirement especially maintaining Bill of entry
wise & Item wise consumption & stock of each material.
All EOU/EHTP/STP/BTP Units needs to gear-up to really enjoy
the process of liberalization and the fruits of ease of doing
business. MA
nawal@bizsoliadia.com
www.icmai.in
 CMA 2016-17
CAREER AWARENESS PROGRAMME
CAREER AWARENESS PROGRAMMES HELD DURING JULY 2016
Date HQ/Region/Chapter Venue
st
1 July 2016 HQ Authpur National Model Higher Secondary School, Authpur
4th July 2016 HQ Techno India Model School, Salt Lake
10th July 2016 Kalyan-Ambernath Kavita Commerce Classes, Ulhasnagar
th
9 July 2016 South - Orissa Prativa Residential College at Chatrapur (Ganjam)
11th July 2016 EIRC Collins Institute
9th July 2016 Aurangabad Rajarshi Shahu Mahavidalya, Latur
4th July 2016 Hyderabad Avanthi Degree College, Barkatpura, Hyderabad
5th July 2016 Hyderabad Sri Venketeswara Degree College, Dilsuknagar, Hyderabad
5th July 2016 Hyderabad Annie Besant Women's College, Gaddiannaram, Hyderabad
th
18 July 2016 EIRC Narendranath Vidyamandir, Kashinath Dutta Road
18th July 2016 HQ Behala High School, Behala
21st July 2016 EIRC R B T Vidyapith, Sinthee, Kolkata
21st July 2016 Nellore Vivekananda Degree College, Nellore
23rd July 2016 Aurangabad Saraswati Bhuwan College of Arts & Commerce
2nd July 2016 Nasik-Ojhar Siddhivinayak Computers, Nashik
19th July 2016 Nasik-Ojhar Mahakavi Kalidas Kalamandir, Nasik
18th July 2016 SIRC Sir M.Ct.M. Boys Hr.Sec.School, Purasawalkam, Chennai
14th July 2016 SIRC Quaid - E- Millath Government College for Women, Binny Road, Chennai
26th July 2016 EIRC Howrah Jogesh Chandra Girls College
th
26 July 2016 EIRC Bantra MSPC High School, Howrah
22nd July 2016 Bhubaneswar Xavier Schools of Management Khurda
19th July 2016 SIRC Doveton Corrie Girls Hr.Sec.School, Vepery, Chennai
th
27 July 2016 EIRC Sri Ramkrishna Sikshalaya, Howrah
16th July 2016 Durgapur Bidhan Chandra Institution for Girls

www.icmai.in August 2016 l The Management Accountant 121

 h
28 July 2016 EIRC Belur Girls High School
28h July 2016 HQ St. Anthony's High School
h
28 July 2016 Nellore Sanghamitra Junior & Degree College, A. K. Nagar, Nellore
th
12 July 2016 Hyderabad CMS Junior College, SR. Nagar, Hyderabad
12th July 2016 Hyderabad Sujatha Degree & PG. College, Chapel Road, Abids, Hyderabad
13th July 2016 Hyderabad Pragnya Women's Degree College, Chandanagar, Hyderabad
13th July 2016 Hyderabad Priyanka Degree College for women, Medhipatnam, Hyderabad
16th July 2016 Hyderabad Cognizent college of Commerce, Ameerpet, Hyderabad
th
19 July 2016 Hyderabad R. G. Kedia College of Commerce, Esamia Bazar, Hyderabad
th
20 July 2016 Hyderabad Ideal Degree College for Women, Dilsuknagar, Hyderabad
23rd July 2016 Hyderabad Badruka Degree College of Commerce
16th July 2016 Cochin Our Lady of Fathima H. S. S., Kumbalangi, Ernakulam, Cochin
29th July 2016 Tiruchirapally Jamal Mohamed College
28th July 2016 Jaipur Chapter premises
12th July 2016 Asansol Chapter premises
4th July 2016 Coimbatore PSGR Krishnammal College
13th July 2016 Coimbatore VLB Janakiammal College
14th July 2016 Coimbatore CMS College of Science & Commerce
18th July 2016 Coimbatore GRD College
19th July 2016 Coimbatore SNR Sons College of Arts & Science
26th July 2016 Coimbatore PSG College of Arts & Science
11th July 2016 Trivandrum Swathi Thirunal College, Neyyattinkara Trivandrum district
31st July 2016 Trivandrum Finwise Institute of Manangement Adoor, Pathanamthitta District
2nd July 2016 Udaipur Vidhya Niketan Sr. Sec. School, Udaipur
6th July 2016 Udaipur The Study Sr. Sec. School, Udaipur
th
9 July 2016 Udaipur The Schollars Arena Girls College, Udaipur
16th July 2016 Udaipur Srajan Acedaemy Udaipur, Udaipur
21st July 2016 Udaipur Meera Govt Girls College, Udaipur
23rd July 2016 Udaipur Sant Anthony Public School
25th July 2016 Udaipur Indo American Public School, Udaipur
29th July 2016 Udaipur B. N. Girls College, Udaipur
15th July 2016 Vishakhapatnam Dr Lankapalli Bullayya College

PROGRAMMES HELD IN JUNE 2016 BUT REPORTED IN JULY 2016

th June 2016
4 Cochin Chapter premises
nd
22 June 2016 Cochin St. Francis HSS, Aluva
27th June 2016 Madurai Nadar Saraswathi College of Arts & Science, Theni
25th and 26th Indore - Dewas SBI Education Fair, Hotel Mangal City Indore
June 2016
(Two full day)
18th June 2016 Trivandrum Govt. College, Attingal, Trivandrum

30 June 2016
th
Trivandrum
Govt. Women's College, Trivandrum
28th June 2016 Coimbatore Nehru College of Arts & Science
th
25 June 2016 Udaipur MLV Shramjeevi College of JRN University
th
27 June 2016 Udaipur Shree Ji Public School, Nathdwara
30th June 2016 Udaypur CCMS of MLS University Udaipur
25th June 2016 Vishakhapatnam Dr V. S. Krishna Degree College

As reported till 01-08-2016

122 The Management Accountant l August 2016 www.icmai.in

 The Institute of Cost Accountants of India
(Statutory Body under an Act of Parliament)
www.icmai.in

Research Bulletin, Vol. 42, No. III (ISSN 2230 9241)

Call for Research Papers/Articles

We invite you to contribute research paper/ article for “Research Bulletin”, a peer-reviewed Quarterly Journal of
The Institute of Cost Accountants of India. The aim of this bulletin is to share innovative achievements and practical
experiences from diverse domains of management, from researchers, practitioners, academicians and professionals.
This bulletin is dedicated to publish high quality research papers providing meaningful insights into the management
content both in Indian as well as global context.

Research Bulletin is now a Quarterly Publication of the Institute. The next issue will be published in October, 2016.

Guidelines to submit full Paper

<< Soft Copy of the full paper should be submitted in double space, 12 font size, Times New Roman, keeping a
margin of 1 inch in four sides, MS Word (.doc) format.
<< Each paper should be preferably within 5000 words including all.
<< An abstract of not more than 150 words should be attached.
<< The cover page should contain the title of the paper, author’s name, designation, official address, contact
phone numbers, e-mail address.

Theme Topic: Companies Act 2013

Papers are invited on the following topics, but not limited to:

<< Corporate Governance

<< Corporate Social Responsibility
<< Independent Director
<< Women Empowerment in the Corporate Sector
<< Mergers and Amalgamations
<< Internal Audit
<< Corporate Fraud
<< Companies Act 1956 Vs. Companies Act 2013
<< NCLT & NCLAT

Papers must be received within 5th September, 2016 in the following email id:

research.bulletin@icmai.in

www.icmai.in August 2016 The Management Accountant 123

123 l
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